If you have been through the long years of study to become a junior doctor, and then and the longer hours of receiving a low salary, it can be very disheartening to learn that although there are mortgages for doctors available with pretty much all lenders, most will want to see regular payslips via an employment contract to prove income.
There are, however, lenders who can assess income in a flexible way for locum doctors. This guide will explain the process for getting a competitive mortgage as a locum doctor to remove the uncertainty from the process.
What are the disadvantages of being a locum doctor when applying for a mortgage?
Being a locum doctor can present challenges when applying for a mortgage due to the nature of the work. The reason that rates of pay are higher is also the reason that lenders may see locum doctors as riskier for lending. That reason is flexibility for the end ‘employer’ to cease the temporary arrangement and pursue an alternative. A major disadvantage for mortgage lending is therefore the difficulty in proving that the locum doctor’s work is regular and will continue for the longer term.
Lenders often struggle to define income for locum doctors because of the unpredictable nature of their work. Unlike salaried employees with stable income that is provable with payslips, locum doctors may have fluctuating incomes based on the number of shifts they take on, and any gaps between assignments, even if these are by choice rather than enforced.
Another issue is that locum doctors may not have long-term contracts or guaranteed hours, making it harder for lenders to assess their financial stability and ability to meet mortgage repayments over time. This uncertainty can lead to higher interest rates or declined mortgage applications for locum doctors compared to traditional employees.
Overall, while being a locum doctor offers flexibility and variety in work opportunities, it can also pose challenges when trying to secure a mortgage due to the unique nature of their employment status. Cleerly and their locum-experienced Mortgage Consultants can offer solutions to the issues highlighted here.
Can I get a mortgage if I am a locum doctor?
Despite the disadvantages, it is possible to get a mortgage as a locum doctor. It is easy to become disillusioned with the questions that your bank or non-specialist broker may ask you, especially when it becomes evident that they do not understand locums and how they work. It is important that questions that appear to be inappropriate for locum work are not answered, as they may lead to a decline based on affordability. It is better to engage a medical mortgage broker who specialises at helping locums at outset. Rest assured, there is a more common-sense way to achieve your objectives!
How to get a mortgage as a locum doctor
Getting a mortgage as a locum doctor can be a unique process due to the nature of your work. To maximise your chances of approval, it's important to take certain steps in the time leading up to your mortgage application.
Firstly, focus on maximising your earnings in the months before applying for a mortgage. Lenders will look at your income over at least 3 months to assess affordability, so ensuring you have consistent and sufficient earnings is key. Gaps don’t look good!
With this in mind, make sure to invoice promptly and keep track of your payments as you will likely need to provide bank statements as part of the application process. Having clear records of your income can help streamline the approval process.
Another crucial aspect is optimising your credit score. A good credit score demonstrates financial responsibility and can improve your chances of securing a favourable mortgage deal. Paying bills on time, reducing outstanding debts, and avoiding unnecessary credit applications can all contribute to boosting your credit score in the months before applying.
When it comes to saving for a deposit, aim to set aside at least 5% of the purchase price if you're buying a property. Having a deposit shows lenders that you are financially prepared for homeownership, and a larger deposit will help you access better mortgage rates.
Additionally, consider paying down any existing debts before applying for a mortgage. Lowering your ‘debt-to-income’ ratio can make you appear less risky to lenders and increase the likelihood of approval. A mortgage approval comes from a lender’s assessment of your affordability.
By following these steps and being proactive in managing your finances, locum doctors can enhance their prospects of successfully obtaining a competitive mortgage tailored to their needs and circumstances by their adviser. On this point, ensure a locum-specialist mortgage consultant is used to prepare months before you need to apply. That way the chances of success are maximised.
What documents will I need to provide as a locum doctor applying for a mortgage?
When applying for a mortgage as a locum doctor, you will need to provide certain key documents to support your application. One crucial set of documents is your bank statements, which serve as evidence of your invoicing and income. Lenders typically require bank statements covering a minimum of 3 months, but this duration can vary depending on the lender's requirements and your locum work history.
In addition to bank statements, some lenders may also request copies of your invoices as further proof of income. These invoices demonstrate the work you have completed and the payments you have received for your services. It is important to ensure that these documents are accurate and up-to-date to strengthen your mortgage application.
Furthermore, lenders may ask for details of your assignments as a locum doctor. This could include confirmation of the NHS trusts or GP practices where you have worked, the duration of each assignment, and any relevant contracts or agreements if they exist. Providing clear and comprehensive assignment details may help lenders assess the stability and consistency of your income as a locum professional. Not all lenders need these as long as your bank statements and invoices paint the necessary picture of consistent income.
Additionally, having an updated CV ready can be beneficial when applying for a mortgage as a locum doctor. Your CV showcases your qualifications, experience, and professional background, providing lenders with valuable insights into your career trajectory and earning potential. It can help to paint the right picture about low risk for a lender.
In addition to the above, there are other common documents that are needed to support any mortgage application, irrespective of how you work, which include the following:
- Proof of identity (passport, or photocard driver’s licence)
- Proof of address (water/gas/electricity bill, council tax bill, credit card statement)
- Proof of UK residency (if you are a foreign national with an overseas passport only)
- Proof of deposit (savings account statement, or a signed letter from a family member if you’re receiving a gifted deposit)
By preparing these essential documents in advance and ensuring their accuracy and completeness, you can streamline the mortgage application process as a locum doctor and increase your chances of securing financing for your home purchase or remortgage.
How much mortgage can a locum doctor get?
When it comes to borrowing on a mortgage as a locum doctor, the amount you can typically borrow can vary depending on several factors. As a guideline, lenders often consider lending around 4 times your annual income, but in some cases, this could go up to 6 times. The key point is how the lender will define your income as a locum doctor, which can have many variations!
To get a more accurate estimate of how much you can borrow, it's best to speak with a specialist mortgage broker who understands the unique circumstances of locum doctors. Many lenders also have online calculators on their websites that can give you an idea of the amount you may be eligible to borrow based on your income and other financial details, but be wary, these are usually geared up for employees and the self-employed who are using net profit rather than gross locum earnings. The output can therefore be inaccurate, but Cleerly’s mortgage calculator for locums can help to arrive at a more accurate answer.
Working with a good mortgage adviser who is experienced in dealing with mortgages for locum doctors will certainly help you navigate through the process more effectively, and find the best possible mortgage tailored to your specific needs.
Do doctors get better mortgage rates?
It is a common misconception that locum doctors face worse mortgage rates compared to regularly employed doctors, due to a restricted number of lenders willing to work with them. While it is true that locum doctors may have fewer lender options, this does not necessarily translate into higher mortgage rates.
High street lenders, who are typically more rigid in their lending criteria, may have limited offerings for locum doctors, but they have the best rates. Once High Street options are exhausted, a good medical mortgage broker will examine specialist lenders who understand the unique financial circumstances of locum professionals, and may also offer competitive mortgage rates.
In fact, some locum doctors may find that specialist lenders provide more flexible terms than traditional high street banks. It is important for locum doctors to explore all available options and work with a mortgage broker who can allow them to access as many lenders as possible that cater specifically to their profession.
Ultimately, it is not accurate to assume that being a locum doctor automatically results in worse mortgage rates. By working with the right lender and seeking out specialist providers, locum professionals can secure favourable mortgage terms just like regularly employed doctors.
Which lenders can lend to locum doctors?
Contrary to what you may think, there are a number of mainstream lenders who may offer flexibility to locum doctors around income assessment. That means you can also qualify for some of the best rates available to locum doctors. Here we will break down a selection of the most popular of these, but the list does not end here.
Halifax – the largest mortgage lender in the can also offer some flexibility to professionals. A Halifax locum doctor mortgage is not the most flexible in this list, but it can offer market-leading rates if certain criteria are met. The key point to qualify for Halifax is to have a contract or assignment schedule that can be used to demonstrate a structured agreement. Obviously, this will not work for all locums.
Barclays – another giant from the High Street, Barclays is also one of the most competitive lenders for rates. Similar to Halifax, they also require evidence of a contract assignment, but they need this to cover 12 months, where Halifax do not technically have a minimum term on the agreement, which makes a Barclays locum doctor mortgage harder to qualify for.
Skipton Building Society – although they may not be a recognisable name given their lack of High Street presence, Skipton are very much a mainstream mortgage lender, sitting just outside the top 10 largest UK mortgage lenders. They are very good for locum doctors, offering both flexible lending criteria to prove income, alongside attractive interest rates. Although the official lending policy asks for evidence of a contract assignment for locum doctors, in practice they can work with invoices/timesheets and bank statements for good quality cases.
TSB – Another lender with very good rates, locum doctors must have 12 months contract assignment history to qualify for a TSB locum doctor mortgage, evidencing no gaps exceeding 6 weeks, and with at least 3 months remaining on the contract on application. If on a rolling contract with no end date the current employer or agency must provide evidence that the contract is still valid. Similar to Halifax and Barclays, the locum doctor policy for TSB is based on their contract workers policy, rather than a specific policy for locums as per Skipton.
Principality Building Society – not exactly a household name in most of the UK, Principality is one of the largest building societies in Wales, and they are happy to lend in England as well. Rates are competitive, and the policy is super-friendly for locum doctors. Locum doctors are asked to provide 6 months proof of income via invoices, remittance or payslips, with corresponding bank statements. Principality will then average and annualise the income they see to define overall earnings for the application. They will also accept newly qualified medical students, who should provide their offer letter confirming their start date and salary. Overall, a great policy for locum doctors!
In summary, there are various options for locum doctor mortgages, but they do rely upon a deep understanding of lending criteria, so it is advisable to use a specialist broker to obtain the best fit.