Sam Camozzi explains locum doctor mortgages.
What is a locum doctor mortgage and how does it differ from a regular mortgage?
Locum doctors work mainly on an ad hoc basis – for example, covering temporarily for permanent staff. Massive demands, both post and pre-Covid, have led to a shortage of doctors and a growing number of locum doctors.
However, because of the way they’re paid, on an hourly rate rather than a salary, and because they don’t have permanent contracts, locum doctors can find there to be a stigma from many lenders that doesn’t exist for a permanently employed doctor.
Can you explain the eligibility criteria for local locum doctors to qualify for a mortgage?
The criteria is fairly simple: most lenders will want around two years industry experience, both for a training doctor or one working as an NHS doctor. However, there are a few niche lenders who may only require six months’ experience.
Locum doctors who have started a new contract for a locum company or locum agency will need about three month’s worth of work within the contract itself to satisfy the requirements of the locum mortgage lender.
What kind of documentation is usually required from locum doctors when applying for a mortgage?
Documentation-wise it’s similar to a standard mortgage: you’ll need identification such as passports, proof of address, bank statements showing your bills and where your income goes.
The only different element is the requirement to provide evidence of a contract. We generally look at your contract to understand how much you’re being paid per hour or per day.
For those doctors who go down the limited company route, we can use the limited company accounts.
Are locum doctors treated differently by mortgage lenders compared to salaried doctors?
Lenders may be more stringent on scrutinising pay slips, particularly if you’re paid via umbrella companies. They may also consider apprenticeship levies that are deducted from payslips.
A salaried doctor, meanwhile, will have pension deductions that the lenders will not look at.
Can locum doctors with irregular income patterns get approved for a mortgage?
Yes, they can. But again, it depends on the way the pay slips are presented. For example, some doctors work more hours than their contract states, which is advantageous for the doctor because they’re earning more money and have more disposable income for the household.
However, many lenders only use the contracted, guaranteed income, and won’t tend to go above and beyond that amount.
If a locum doctor takes some time off, which is quite normal, the lender will look at a three month average and work out their earnings from there.
While lenders won’t tend to take any additional income above the contract into account, if you’re earning less than the contracted amount, lending will be based on this lower amount.
What factors do mortgage lenders consider when assessing the affordability of a mortgage for locum doctors?
It’s the same as for anyone applying for a standard mortgage, whether they are employed or self-employed. Lenders look at your income, although as mentioned this is assessed a little bit differently.
The mortgage lender will also look at any debts and any children will be taken into account for affordability. The deposit also comes into play with the affordability as well. This is something we will always speak to you about during the mortgage process so that you know how much you can borrow and how different lenders will assess you.
Are there any specific mortgage products or deals available exclusively for locum doctors?
There are some specific deals for locum doctors available from more specialised lenders rather than the high street lenders. The products of high street lenders aren’t specific to anybody – so if you fit their criteria, you can have access to their products and interest rates. Some of those high street lenders will accept locum doctors.
How does the income of a locum doctor affect the amount they can borrow for a mortgage?
In terms of affordability on any mortgage, it’s all down to a loan to income ratio – an LTI, for short. The larger the deposit a client has, the better the LTI. Generally lending is calculated at four and a half times salary. That’s used quite widely.
Some lenders will lend up to five times your income. It depends on the deposit you’re putting down and how much your actual income is. The more your household is earning can affect how much a lender is willing to lend and extend that LTI.
Can locum doctors get a mortgage without a substantial deposit?
Yes, you can get a mortgage based on a deposit of below 10% – but it may be difficult to do so. Your credit rating will have to be good.
Interest rates are very high at present which can put a lot of people off buying with a low deposit. However, it also depends on the market and what products are available. The higher the deposit, the better interest rates you can usually get.
Are there any additional fees or charges associated with locum doctor mortgages?
No, fees are very similar to that of a standard mortgage. Some products may have additional fees on them, for example, valuation fees, but generally it’s similar to fees on standard mortgage products.
How does the process of obtaining a locum doctor mortgage differ from a regular mortgage application?
The process is very similar to the application for a standard mortgage. Lenders may look at the locum contract rather than the payslips. There might be more underwriting from the lender.
The lender may do a few more checks on the doctor, for example issuing out employer or agency reference requests. It can take approximately two weeks for a mortgage offer to be made, but sometimes it may take longer.
Are there any specific challenges or considerations that locum doctors should be aware of when applying for a mortgage?
There are no special or specific considerations, but it certainly helps if you can make sure you have a good credit rating, keeping credit card balances below the 50% mark, for example.
Make sure you have the correct contract ready and that the income shown on bank statements matches your pay slips and their contract – that will help a lot.
What steps can locum doctors take to improve their chances of securing a mortgage?
As mentioned above, having a good credit score is important, as well as making sure there are no unusual transactions on bank statements. Large sums of money going in and out can slow things down. Ensure your bank statements are as clear and as concise to the lender as possible.
Can locum doctors who work through limited companies still qualify for a mortgage?
Yes, they absolutely can. We can look at whether or not we use the net profits of the company or we can look at whether we work off the contract. We’ll decide that with the client.
Do locum doctors have access to the same range of mortgage products as salaried doctors?
Yes, the same products are available from a vast array of lenders.
Are there any potential drawbacks or disadvantages to consider with locum doctor mortgages?
The main drawback is you don’t have access to all the lenders, as some don’t offer mortgages to locum doctors. That could potentially mean locum doctors don’t get access to the best interest rates that would be available to a standard mortgage applicant.
Can locum doctors remortgage their existing property to take advantage of better rates or terms?
Yes. For those coming up to their first remortgage, we can look at remortgaging away from the current lender, or simply staying with the same lender with a product transfer, whichever works best.
What options are available to locum doctors who wish to buy property with a partner or spouse?
It’s the same as for a standard mortgage. It also depends on whether the partner or spouse is working or not, as with a standard mortgage. If your partner or spouse is working, that will naturally increase the affordability of the mortgage.
Are there any specific mortgage lenders or institutions that specialise in locum doctor mortgages?
Currently, (August 2023) there are a couple available, but we would recommend locum doctors look at what is available from high street lenders too. A good broker will recommend the most suitable options for your specific situation.
Your home may be repossessed if you do not keep up with your mortgage repayments.
A good broker will recommend the most suitable options for your specific situation.