Despite the weirdness that is Brexit, the traditional increase in the number of new mortgage applications in springtime continues. There are plenty of decent rates out there, particularly fixed rates. But what if you are a locum? It may be great to have the flexibility and autonomy of working patterns, but if it stops you having a mortgage it can cause a real headache.
All locum roles are not the same in the eyes of a mortgage underwriter. There are differences in the way that types of locum roles are assessed. For example, they will assess a ‘salaried’ locum differently to a self-employed portfolio locum working in various practices in short term roles. It is worth taking specialist advise before you start the application process.
But fear not, it’s not as hard as you might have heard.
Here’s my top tips for getting a mortgage…even if you have only been a locum for six months!
1. If you are a locum in the early days of your locum career
In your first year as a locum, your income will have been employed for part of the year while you complete your training, and then become self-employed after becoming a locum. Sounds complicated, but it’s not necessarily impossible to get a mortgage. The key thing here is the involvement of an accountant. Not just any old accountant. Choose someone who deals with other medics and specifically locums. The reason this is vital is that there are a few mortgage companies who will consider lending if a suitable accountant can project forward and give an estimate of your whole year’s locum earnings. They will not take your own projections into account.
"If you haven’t got a terribly good credit rating or maybe haven’t used credit at all, and therefore have a non-existent rating, there are things you can do to improve your score..."
Specialist medical accountants are a jolly good idea when you are a locum. They can work wonders wrestling your sometimes-complicated earnings into a standard tax return while claiming back fees and allowable expenditure along the way. Add to this their ability to help with mortgages and they rapidly become a vital part of your financial team. But do bear in mind very few mortgage companies will consider lending to you even with an accountant’s projection so speak to your specialist financial adviser to make sure you don’t waste your time applying to unreceptive lenders.
2. More established locums
Once you have two to three years of self-employment, things get much more straight forward. But not as easy as when you were in hospital service and you just had to present three months pay slips of course. Because of your fluctuations in income, mortgage companies want to see a longer snapshot of your earnings to decide if you can afford the mortgage.
To give you the maximum number of lenders that will consider lending to you in the future, try and keep your records carefully as you go along. Ideally you need:
- Three years accounts and/or SA302s (ask your financial adviser or account if you don’t know what these are).
- Three months bank statements.
3. Don’t underestimate the costs of buying…it’s not just about the deposit!
Here’s a few areas to check you have considered and budgeted for.
- Surveyor fees
- Legal and solicitor costs
- Valuation fees
- Estate agent fees
- Stamp duty
- Electronic transfer fees
- Removal costs
Once you have these all estimated, you will really know the deposit you have left and therefore the mortgage you can reasonably expect. If in doubt, ask your financial adviser to help with working out your maximum borrowing figure.
4. Check your credit scores and history.
Granted it’s not the most exciting way to spend 10 minutes, but it’s not hard and if you have a problem you can try and sort it out in advance rather than falling for your dream home or needing to move to get children into a certain school and finding you can’t.
There are several credit check agencies out there. I use Experian.
If you request a statutory credit report its either free or costs only a few pounds, and you don’t need to sign up to any other services.
If you haven’t got a terribly good credit rating or maybe haven’t used credit at all, and therefore have a non-existent rating, there are things you can do to improve your score such as:
- Register on the electoral roll
- Pay bills on time
- Check for mistakes on your credit report
- Check for any fraudulent activity on your file
- Check to see if you are linked to another person
- Don’t have County Court Judgements against your name
- Don’t have high levels of existing debt
- Don’t move home a lot
5. Clean up your outgoings!
How much you can borrow is based on your earning but, almost more importantly, what you spend and what will be left over to repay the mortgage. So, take a look at your bank statement and be ruthless with those seldom-used gym memberships, consider switching to paying for things annually instead of every month, and check all your direct debits for possible cost savings such as with your utilities.
6. Give some thought to what type of deal you want. Fixed or tracker/variable are the main choices.
With a fixed rate you have total security knowing the rate wont change while you are on a deal. That’s great if interest rates rise, as your rate won’t, but if they go down you wont benefit either.
A tracker or variable rate will change over the deal’s lifetime. When rates reduce you can smugly think about all the money you are saving, but if they rise you could see your mortgage repayment getting expensive.
It really is a personal thing. Discuss it carefully with anyone else that you will be taking out the mortgage with and your adviser.
7. Consider how long you want to be tied to one lender.
When you decide on a mortgage deal, most will have a penalty if you leave them either by remortgaging to another lender or sell up and repaying the mortgage before the end of the deal. After a few years you may want to switch lenders to get a better deal, or move and need to borrow more. Not getting stuck in a deal when you will need flexibility can save money and frustration, so think ahead to when you might need to make a change due to schools, work or just because you fancy it!
8. Make sure your mortgage adviser understands how locums work.
Without knowledge of how you work, your adviser could present your mortgage application to lenders that takes no account of the fact you worked within the NHS for years before becoming a locum. Also, unless the mortgage company has dealt with lots of locums (which most don’t), they won’t know what to make of your varying hours and income and decline the application. A declined application can make your chances of getting a future mortgage approved less as it can affect your credit rating, and you must declare if you have been declined for a mortgage elsewhere.
Next steps to help you get a mortgage
So, what now? If you are planning on buying in the next year, start shaping up your finances now to make it easier in the future. But if you need to find a mortgage now find the right specialists to help you as soon as you can. Mortgages are not a quick, overnight process!
Our articles are designed to be informative but do not constitute financial advice. We recommend seeking specialist advice before making a decision.
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