With house prices rising fast and question marks over mortgage availability, Ollie Sills, Chase de Vere Medical’s Head of Mortgages, looks at five areas where doctors may have more options than they realise when it comes to arranging a home loan.
While much of the economy slowed during the Covid-19 pandemic, the UK’s housing market continued to race ahead. The average home in the UK cost £242,832 in May according to the Nationwide Building Society, 10.9% more than 12 months previously; that was the fastest rate of house price inflation for almost seven years.
There are several explanations for the booming housing market. A shortage of supply, increasing numbers of people looking for more space, and reduced stamp duty rates have all played their part in driving prices higher. But whatever the reason, the surge risks pricing many doctors out of the market, whether they are looking to buy for the first time or trade upwards.
Mortgage market conditions compound the problem of higher prices. Mortgage interest rates are currently close to all-time lows, but many lenders remain conservative. While product availability is beginning to improve, there are still far fewer deals on offer to borrowers with smaller deposits. And borrowers with less typical income profiles – including many medical professionals – are particularly likely to find lenders’ doors closed.
Still, it is not all bad news. The mortgage market is fiercely competitive and with support from a knowledgeable mortgage adviser, it is often possible to find great deals even if your circumstances do not fit the mould. Here are five ways in which the mortgage market might surprise doctors – and in a good way.
1. Some newly-qualified professions will be able to borrow up to six times’ their salaries
Some mortgage lenders have extensive experience of lending to doctors and regard the profession as a good risk. These lenders have a good understanding of the career path for young doctors – and, crucially, their future pay grades – and they are prepared to make advances on this basis. Newly-qualified professionals may therefore be able to secure mortgages that are much larger, relative to their current earnings, than other borrowers could obtain. In some cases, lenders will go up to five times’ salary – and in certain cases, you may even be able to get six times if your circumstances are right.
2. Even if you are working in the UK on a visa, you still have a range of mortgage options
Many non-British doctors working in the UK courtesy of a visa assume they will not have access to mortgage finance – or even that they are not allowed to buy property. This is not the case. The property market is open to non-British buyers and a number of lenders are happy to lend to borrowers working here on a visa. They will consider factors such as what your visa was issued for, how long it lasts for and whether you have previously renewed a visa successfully.
3. You can own your own home even if someone else is contributing to the mortgage
“Joint borrower, sole proprietor” mortgages can work well if you are daunted by monthly mortgage repayments and have a family member who is able to help you meet the cost. The concept is simple: while there will be more than one party on the mortgage – and therefore responsible for repayments – ownership rests with you. This can help you secure a mortgage in the first place, since there will be more than one borrower’s income to assess, and manage the monthly costs. But only your name will be on the title of the property.
4. Locum doctors can still get mortgages
Many locums assume they will not be able to get a mortgage because their income may be less predictable; equally doctors who take on locum work in addition to their normal employment often think lenders will not be prepared to take this extra income into account when considering their applications. However, some lenders are happy to consider locum income when making lending decisions. In certain cases, locum doctors in their first medical roles will be able to secure mortgages as long as they have a record of earnings going back at least six months.
5. A gift towards your deposit does not have to come from a family member
Borrowers struggling to raise the deposit on a property purchase often depend on help from families. But while such gifts must be declared to your mortgage lender, they do not have to come from a family member if someone else is prepared to help – a number of lenders are happy with such arrangements. Such gifts have to be made as loans where there are no repayment requirements and where your donor has no legal interest in the property (though solicitors can draw up provisions on what happens when you sell).
Your home may be repossessed if you do not keep up repayments on your mortgage.
Content correct at the time of writing and is intended for general information only and should not be construed as advice.