How to get a professional mortgage
Your hard-won qualifications and structured career path can win you 8 money-saving advantages when you’re looking for property finance.
Doctors, architects, teachers, pilots… you’ve been sitting exams while your peers have been down the pub. Is there a payoff in terms of mortgage borrowing-power? Yes.
And there ought to be, considering the amount of time (and money) you’ve invested in your education and training: two to five years (and £120,000) for you pilots, four to five years for teachers, five years for pharmacists, up to six years for vets and solicitors, seven years for pharmacists, and up to 16 years for doctors.
You’re still putting in the long hours, you’re carrying some serious professional responsibility, and many of your contemporaries in sunrise industries are earning a lot more than you.
So why do lenders want to give you special treatment?
What banks and building societies like about "a profession" is:
- The structured career path: lenders can not only clearly assess what you’re earning now, but also predict what you can reasonably be expected to earn in the future.
- Security: with many professions being public-sector-funded there’s an understanding that the professions offer more stable employment prospects than private businesses and entrepreneurial start-ups.
- Stability: having invested heavily in your own training and professional development, and hopefully enjoying some autonomy and role-direction, you’re less likely to jack it all in and become a house-painter.
- Employability: internationally-recognised professional qualifications make it easier for you to find a new job if you’re relocating or looking for promotion.
Who do mortgage lenders count as professionals?
The careers which usually allow you to apply for a professional mortgage are:
- medical doctors
- police officers
- civil servants
- officers in the armed forces
In general, you’ll need to be fully qualified, registered, practicing in your profession, and a member of your professional association.
But some lenders will consider trainees, most usually in the accountancy, legal and actuary professions.
If you’re unsure about whether you might qualify for a professional mortgage, an experienced mortgage broker can advise you, and also tell you how much you may be able to borrow.
How do you get better deal with a professional mortgage?
1 Get a better interest rates
Some lenders will offer a reduction against their standard lending rates – because they want your business.
But don’t get fixated on chasing a boastably-low interest rate. The rate you pay is important – but it may not be the most important issue for you. Depending on the stage you’re at in your career, the amount of money you can borrow might be the crucial issue for you. And saving on other fees and charges (arrangement fees, valuation fees and legal costs) might have a big impact for you at this point.
2 Get a mortgage with a smaller deposit
Some of the new lending products for professionals offer 95% mortgages. Which can be extremely useful to first-time buyers with only a small amount of money to put down.
That’s a big advantage compared with the maximum 85% loans, requiring a 15% deposit, which are generally available to borrowers in other types of work.
3 Borrow more on a lower income
This is because lenders are able to take your likely future earnings into account in a clearly-structured career. This is relevant for a loan which is going to be repaid over 20 or 25 years.
Standard mortgages will usually allow you to borrow around 4 times your salary. The new “professional mortgages” offer up to 5.5 and sometimes as much as 6 times your salary.
If you’re making a joint application, and only one of you qualifies as a “professional”, the other applicant’s salary will be subject to the standard income multiplier.
4 Borrow more on a higher income
A range of lenders a willing to write bigger mortgages for professionals with higher incomes – usually above £50K.
The greatest discretion is used for professional borrowers earning more than £100K a year.
5 Structure your mortgage repayments more flexibly
This is an important issue for professionals who are effectively self-employed, such as GP partners, architect partners, solicitors in legal cooperatives and barristers in chambers, and pilots working as independent contractors. As well as those who are fee-earners, and whose annual incomes are heavily bonus-related.
- Being able to structure your mortgage repayments around "lumpy income" can be a great advantage: you can borrow a larger amount that your overall annual earnings can support, but which your monthly salary may not be able to service.
- For example, professionals well-established in their careers may be amongst the limited numbers of borrowers who could be well-advised to take out a low-cost interest-only mortgage.
- Not usually a recommended option if it’s going to leave you with an untouched capital sum to repay at the end of the mortgage.
- But for professional earners who have irregular fee payments, or annual bonuses, the best borrowing might be an interest-only mortgage with lower cost monthly repayments, with a facility to make penalty-free substantial lump-sum repayments against their capital borrowing each year.
- Even on a standard repayment mortgage, an Enhanced Overpayment Facility Options for professional borrowers may allow for 10% or even 20% annual lump-sum capital repayments on interest-only mortgages, or even unlimited overpayments.
6 Borrow back
Just as professionals can have lump-sum payments that make it easy for them to overpay, they’re also more likely to want to make investments or larger expenditures when opportunities arise.
Various mortgage products will allow you to take back capital payments you’ve made, or to apply for additional funds without going through a formal application process.
One arrangement is an offset mortgage allows you to make substantial overpayments with your bonuses or accumulated client fees, and then access the funds later.
7 Take a repayment holiday
If you want to step off the career ladder for a time – to do postgraduate study, manage family responsibilities, or backpack around Asia – you might want to take a break from mortgage repayments.
Once you’ve established a repayment record, many professional mortgages provide the facility to miss payments, if you agree it with them.
8 Become a consultant / self-employed
Most people who’re considering going into consultancy will need to put any property-purchase plans on hold until they’ve established a solid earnings record.
But for professionals with marketable credentials and experience there are lenders who will make a mortgage offer on just one year’s accounts, and even if you have some adverse credit.
Get experienced, independent mortgage advice
Understanding all these different mortgage features, and the impact they’ll have on the cost of your borrowing, is fairly complex.
Which is why it’s important to get the advice of an experienced mortgage broker who can look at the range of borrowing options across the market that are available to a professional with your circumstances. We will help you evaluate what’s going to be the best mortgage offer for you, prepare your application so it fits the criteria of our targeted lender, and negotiate on your behalf.
Call Clifton Private Finance to set up a first, no-fee discussion of what you need:
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