As medical professionals, you are extremely busy. Whether you are looking to remortgage your home, taking your first step and buying a home, or perhaps beginning a property portfolio using buy-to-let mortgages, the mortgage journey can be difficult to navigate. That's why it's important to use specialist mortgage brokers.
Even if you have been through the mortgage process, the mortgage market changes regularly, and therefore it is good to recap and understand how things may have changed and receive mortgage advice. The mortgage application process can sometimes be lengthy, depending on your circumstances, and other times, extremely quick! It's one of the biggest financial decisions you have to make and therefore essential you get it right.
We have written a blog on how long it takes to get a mortgage here
Before getting started, it is important to ensure you have a good credit history and that no nasties are hiding. We recommend you look up your credit report using a free service such as www.creditkarma.co.uk. If all looks ok, then you can progress to the next stage. If you have found some issues, now is the time to resolve them.
We've put together a handy checklist specifically for junior doctors or people with a limited credit history, to help them put themselves in good stead. You can read the checklist here.
Normally, mainstream lenders of mortgages will lend up to around 4 times your annual gross income. This could increase or decrease, depending on your loan to value, with some lenders going as high as 5.5 to 6 times your annual gross income. If you have a joint income in the household, then the amount you can borrow could be significant.
Using the general rule of thumb, if you have a combined household income of £75,000, you would be roughly able to borrow £300,000 on a mortgage up to potentially £425,000. (This assumes you have a good credit rating and no other ongoing financial commitments which could reduce this amount).
You also need to consider your monthly payment. Whilst you may be able to borrow a large amount of money, you need to ensure you can afford your mortgage monthly payment now and in the future.
Equally, if you are refinancing your loan, you are unlikely to gain a lower interest rate in the current climate, and this heightens the need for specialist mortgage advice to ensure you are getting the best mortgage deals. If you're interested in learning more about how much you might be able to borrow, you can book a free consultation with one of our mortgage advisers.
The answer is yes. Some lenders will have a specialist range of mortgages for doctors, also known as professional mortgages, however, it's not always true that they will be cheaper or the most competitive. It's why it is important to use a specialist mortgage broker to ensure you get the right mortgage with the cheapest monthly payment.
Loan to value is how much money you are borrowing against the total cost of the house. The difference will be your deposit. For example, you want to buy a house for £300,000 and have a deposit of £30,000. You will therefore need a mortgage to cover the remaining £270,000. This would be a 90% loan to value. Usually, there are better mortgage deals and mortgage rates that lower the loan to value you have.
There are several options available to you when considering the right home loan.
Traditionally over the past 10-15 years, most clients have opted for fixed-rate mortgages. Fixed-rate mortgages are usually over 2, 3, 5, and 10-year time horizons. This means the monthly mortgage payment is fixed for the term selected.
Tracker rate mortgages are home loans that follow the Bank of England Base Rate. Sometimes this can be cheaper than fixed-rate mortgages, however, the mortgage payment will not be fixed, and will fall and rise in line with the Bank of England Base Rate.
A variable rate home loan has a rate set by the lending company. Often it is the rate you will go onto once your agreed initial term has finished and you have no control over the mortgage payment each month as this will be determined by the lender.
Offset mortgages can be really useful for doctors, especially if you pay your own tax or have surplus savings. Any money you have in your savings account linked to the mortgage will reduce the amount of loan you pay interest on.
There will always be some costs to consider when taking on a mortgage. If you are just remortgaging, these costs will likely be lower, however below are potential costs you need to take into consideration when applying for mortgages.
These can vary from mortgage broker to mortgage broker, but typically expect to pay around £400 for an adviser to work on your behalf to find you the best deal.
Each lender usually applies a product fee. This is a one-off fee for taking on the mortgage and can vary from £0 up to £2,500. Most lenders will allow you to add this to the amount being borrowed, but please remember, this will increase your monthly payments.
You will always need to engage a solicitor. If you are just remortgaging, some mortgage lenders will provide 'free legals' which means you do not need to use your own solicitor unless you would like to.
You may look to move all your own furniture or use a company to help you. Some companies also provide a packing service, something worth considering if you just can't face the huge task of packing yourself!
Now you now how the process works, you might be interested in our blog How long does it take to get a mortgage?
As medical professionals, your pay structure can be confusing to many lenders if not presented in the right way. You may also struggle to get the best deal in the market. If you are moving onto your next rotation, just becoming a GP, or locuming whilst finding your perfect job, working with mortgage brokers who understands the medical profession and your pay structures is essential.
You want to know that you have access to the whole of the market and work with a broker who can take the strain out of getting a mortgage in place. Not doing this, could limit you to high-street lenders only and you having to go to each lender yourselves.
Once in touch with a mortgage adviser, they will complete a fact find, which is where they find out information about you that will form the basis of your application.
From here they will be able to review the market and provide you with several options suitable to your needs. Please note, sometimes the broker may complete a soft credit search. This is where they check your credit report and take this information to enable them to see which mortgage lenders might be prepared to provide you with a mortgage. A soft credit search doesn't impact your credit score.
Once your ability to borrow has been assessed, the mortgage adviser may provide you with a decision in principle. This is from a particular mortgage lender and is in essence a broad acceptance that they would lend to you based on the information you have provided, and subject to a formal assessment of the property you wish to buy and your full financial position. This is not a mortgage approval, or a binding offer from the mortgage lender but will allow you to prove to estate agents and sellers that you are in a good position to be able to proceed with a purchase. If you are remortgaging, this is a process that will be completed as part of the full, official mortgage application.
A decision in principle can sometimes leave a hard credit search on your record but does depend on which lender has been used as it varies between mortgage lenders. It is best to ask your mortgage adviser about this before proceeding. The lender will have accessed your credit history, combined with information about your income and expenditure and other credit commitments to make an initial decision on whether they would lend to you.
If you have accepted the advice and recommended mortgage from the adviser, they will proceed with a full market application (FMA) and this is when a hard credit search will be completed on your credit record. This is where a greater level of information is provided to the mortgage provider. Each lender is different, and the level of data needed varies too. As such, you may be asked a lot of further questions about the property you have, or it may be limited.
It is important to ensure you have all the documentation ready to be submitted to the lender. Usually, lenders will need proof of identification. This could be a passport, driving licence, or identity card, combined with a recent utility bill. Normally you will be asked for 3 months' bank statements, payslips (if employed) tax returns (if self-employed) company accounts (if a company director).
Once submitted, you will hopefully receive the good news that your mortgage has been agreed, subject to a valuation. This means that once they have assessed the property (assuming it is in good condition and seen as acceptable collateral) they will provide you with a formal binding offer. Usually, the offer will be valid for a minimum of 3 months but could be as long as 6 months, or 12 months for new build houses.
You can have a variety of mortgage valuations. The lender will usually carry out a fairly light touch assessment of the property, with some not even visiting the property and completing a 'desk-based valuation'. If a physical valuation is completed, you can ask for a more thorough assessment if you have concerns about anything to do with the property. It would usually cost more to do this. Alternatively, you may wish to pay for your own independent valuation and building survey. Examples of when you may wish to do this would be if you have concerns around timbers in the loft, or you felt there might be damp issues, etc.
If the mortgage lender is happy with the application, all the documentation provided and the valuation, you will receive a formal mortgage offer. This means you can proceed with the purchase or remortgage. If it's a remortgage and you have used the free solicitors provided by the lender, things should move along quickly from here on in. The same checks are not needed as there are for a new house purchase, your old mortgage will be paid off with the proceeds of the new mortgage. There is nothing more to do until you are coming to the end of your next mortgage deal.
If you a buying and selling or just buying, you will now need to instruct your solicitor to begin the searches and all other legal aspects of conveyancing. You are now in the hands of the solicitors. Your mortgage broker should keep in touch with your solicitor to see how things are progressing, but it is important that you keep in touch with them to ensure the process is progressing as quickly as you can, ensuring your mortgage offer doesn't expire and you have to start again.
Once all the conveyancing has been completed and you are happy, you will exchange contracts and complete on your new house.
Move in and enjoy your home! Keep in touch with your mortgage advisers who will be able to help you secure your next mortgage when your current rate comes to an end.
If you're interested in a free initial consultation with one of our mortgage advisers, you can fill out this form and book a slot directly here.
We also created this handy infographic which takes you through all of the steps in the mortgage process.
Talk to us for further information. Click here to enter a few simple details and one of our specialist mortgage advisers will be in touch. Your initial consultation is free of charge.