Mortgages for GPs

Are there any special types of mortgages available for GPs?

There are, but not just for GPs – there are mortgages for professionals, and of course GPs would fall into that category. These mortgages are a little rarer nowadays, as lenders have pushed their standard criteria out a bit. So what was perhaps covered by professional mortgages in the past now falls more into the mainstream. 

One or two lenders still give slightly better rates on a professional mortgage compared to their normal products. A few will offer enhanced income affordability, so you can technically borrow a little bit more as a professional, because your income is that much greater. 

Since increased interest rates have made affordability more of an issue, many lenders have shied away from bringing out specific mortgage products. They will have specific mortgage underwriting rules, but most lenders wouldn’t have a different product for a GP or a professional.

Should GPs get a repayment or interest only mortgage?

I don’t think there’s anything in particular for GPs to determine that. Interest only mortgages do tend to suit higher income earners and professionals, so in that regard it could work. 

With an interest only mortgage, at the end of the mortgage term the balance will not have come down. You’ll have to come up with all that money to repay the loan. As a partner of a GP practice, when you leave that practice you might be entitled to a lump sum. Certainly if that practice owns the building and you’re a part owner, you’re probably going to get some of that back. So there is a potential repayment source there for an interest only mortgage. 

GPs, whether employed or self-employed, will get an NHS pension scheme, so you could also take lump sums out of that to repay your mortgage if needed. Generally, because GPs are higher earners, interest only could fit. I won’t suggest it’s the way to go, but there’s certainly a higher chance of it working for them.

Why might a GP consider an offset mortgage?

Again I’m going to refer here to GPs that are self-employed – either locuming or as partners in a practice. If that’s the case, they’re going to have a tax bill. It’s not deducted at source. 

I’ve dealt with GPs for many years and some practices will hold back the partner’s money for tax and deal with that for them – which is great because it removes the worry. But if your practice doesn’t do that and you have to save money for your tax, then an offset mortgage can work quite well. 

You’re going to build up a savings balance – if you put that in the building society it is going to be a couple of percent in interest and you’re probably going to get taxed on it. You can get taxed on your tax money, unbelievably! 

An offset mortgage is a very tax efficient place to put your money. I would add a caveat that offset mortgages are priced higher than other mortgages, so a good broker will analyse whether the ratio of savings to your debt balance makes an offset mortgage efficient or not. 

Although it’s a great place for your savings, it doesn’t mean it’s the right product. If you’re paying more on the debt that’s left, you could gain with one hand and give it all back with  the other. It’s our job to work that out. 

But it’s a potential option for anybody who’s self-employed – and particularly GPs where that income is probably higher.

Should doctors or GPs choose a fixed or variable rate mortgage?

On a fixed rate, your payments won’t change – but that mortgage will carry early repayment charges during the fixed rate period. So it’s not very flexible. 

With a variable rate mortgage, your payments can go up or down. Most of those don’t have early repayment charges – they’re a lot more flexible. You can repay the debt in part or in full and not be penalised. 

Of course individual advice will always vary. But, in general, a partner of a GP practice is likely to be settled. You tend to join a practice as a partner and probably not go anywhere else. You may be living in your forever home or certainly a very long-term home. That means fixed rates are probably a consideration, because you don’t need that flexibility. 

But if you’re a locum GP, who likes the flexibility or may not have found the practice that they want to join yet, maybe a variable rate with no penalties makes more sense. Until you know you want to settle in a certain postcode, you might want the ability to move at any time as an opportunity arises. 

There are a lot of other factors. You might be coming into a lump sum; you might want to do home improvements in the future… There are many reasons why those general rules won’t apply, but as a locum you could be in Portsmouth now and then in six months time you could be working in Manchester. You can go where you want to go and therefore that flexibility could be important.

How much deposit do GPs need for a mortgage?

It’s no different than a standard mortgage. The minimum deposit is generally 5%, but it depends what price you’re buying at. With purchase prices over half a million you’ll probably need a little bit – perhaps 10% or 15%. 

Even with our expertise, placing a GP mortgage can be a bit more difficult because of other complications. So the bigger the deposit you have, the lower the risk to the lender and the more open they are to a mortgage. 

The bigger the deposit anyone has, the better the interest rates they will get. But there’s no reason why a self-employed partner GP can’t get a 95% Loan to Value mortgage. For the self-employed or a locum doctor with irregular income, having a larger deposit is probably slightly more important than for an average borrower.

Do GPs need a mortgage advisor that specialises with doctors and partners in practice?

Absolutely. Let’s split this into the different types of GPs. 

A salaried GP at a practice is not particularly complicated. If you’re on a permanent contract, you’re like any other salaried person. Locum GPs are probably the most difficult, because it’s the same as being a self-employed bricklayer or plumber – you’re going to need two years’ worth of accounts to get a mortgage. 

We have got locums by with less before, especially if they are working predominantly at one practice on an almost permanent basis. 

The main type we see are GP partners. Many lenders don’t seem to realise that although  a GP partner is self-employed, it’s different to other self-employed professions. For example, GPs are the only self-employed people to participate in the NHS pension scheme. That’s how close they are to being employed. 

If you join a practice as a new partner, you don’t dilute the partnership profits because of the way practices work. You can’t compete with each other. There are so many sessions per week that the practice must cater for, so if you come along and do 10 sessions a week, you must be replacing somebody else’s 10 sessions so it doesn’t dilute the profit. 

Again, a normal lender might want to see two years’ figures, but even if you joined a practice last week, if it has been trading for years and years we can get lenders to look at it. 

They will work with the practice manager and accountant to find out what percentage of that practice you own and go from there. A standard broker won’t understand any of that. I’ve had plenty of cases where a GP has spoken to another broker who couldn’t help but we could. 

A self-employed partner GP is not like any other professional. it’s not even like a partner of a law firm or accountancy firm. We can easily work out what that person’s income would be based on the practice income for the last few years. But some lenders and brokers don’t necessarily understand that.

I’ve been doing this a long time. I remember when GP partners joined a partnership and had Steps to Parity. Now partnerships are desperate and there’s no such thing as Steps to Parity – you come in straight in on full income. We know how all of that works.