Mortgages for Law professionals, barristers & bar council
There is certainly no denying the career of a barrister is a reputable and potentially lucrative one. However, securing a mortgages as a barrister can in some cases be a little less straight forward that you might think, especially in the earlier years of your career.
What issues may affect barristers ability to secure a mortgage?
One of the biggest issues barristers can face when securing a mortgage is cash flow. Due to the nature of the role, income can be sporadic and irregular, often impacted by trial lengths and ongoing client debts.
There are also several costs to factor, which can be offset against their income, including chambers costs and legal subscriptions. Most barristers will be self-employed and Income can fluctuate significantly depending.
Most mainstream mortgage providers will take an average of your most recent two years income or the latest year’s income if it’s on a decreasing trend. A year with a dip in earnings can therefore make a substantial difference in your borrowing potential, especially if it’s the latest year.
What are mortgages for barristers?
When we talk about mortgages for barristers or Law professionals, we are generally referring to the specialist criteria the lenders offer, rather than specific mortgage products for barristers.
Almost all mortgage providers consider applications from Law professionals, however some take a more holistic view of their situation and understand the nuances securing a mortgage for barristers and law professionals. High street banks & building societies are usually geared for high volume ‘off the shelf’ mortgages.
They do not generally have the time or expertise to fully assess complex applications in a holistic way and using an independent broker with access to a wide range of lenders will give you the best chance of securing the best deal.
How much can barristers borrow on a mortgage?
This will depend on your own individual circumstances and the lenders criteria. Most barristers will be registered as self-employed and their income will most likely fluctuate. If you’re registered as a sole trader most lenders will average your most recent two years net profit or the latest year if it’s on a decreasing trend.
If you’ve got a limited company set up, most lenders will take an average of your most recent 2 years salary and dividends, this may not be a fair representation of your income if you’ve retained profits in the business. Some lenders will consider using the retained profit and salary instead of your share of salary and dividends, this can have a massive impact on the amount you pay u can borrow.
Some lenders will consider your latest years income instead of averaging, this can make a considerable difference, especially if you’ve had a dip in income in recent years.
Generally, mortgage lenders will consider lending between 4-5 times your income, although for those on particularly high incomes may benefit from increased income multiples, potentially 5.5 – 6 times. The treatment of is equally if not more important than the income multiples themselves.
Example – Legal professionals on a Limited company set up
Let’s assume two lenders are both offering borrowing on 5 times income multipliers.
It’s worth mentioning that not all applicants will be offered 5 times income multiples, and this is simply for illustrative purposes. The applicant is a sole director/ shareholder of a company that made an annual profit of £100,000 this year and £50,000 the previous year.
Whilst his company profits were £100k & £50k he only draws £50k salary and dividends In the latest year and £30,000 in the previous year.
Lender 1 uses share of profit as income not salary and dividend income and used the latest years income rather than averaging. (£100,000)
Borrowing potential – £500,000
Lender 2 uses an average of the last 2 years salary and dividends. (£40,000)
Borrowing potential – £200,000
Legals professionals -Sole trader set up
The same principle applies some for law professionals on a sole trader structure, however based one the pre-tax net profit itself.
What mortgage interest rates are available for barristers and legal professionals?
The mortgage interest rates available to barristers and law professionals will vary depending on your own circumstances and the market conditions at the time. There are however several factors that will influence the rates on offer to you.
If your income has fluctuated significantly in recent years and you want to borrow based on your most recent years earnings rather than averaging, you may find you have less options available than those with a stable history of earnings.
Naturally if you have less options available the rates can be higher by default and if you’re using a specialist lender the rates will likely be higher than mainstream lender
Can I get a mortgage as a newly qualified barrister?
Whilst established barristers can earn vast sums of money, it can take time. Newly qualified barrister’s incomes can be significantly lower and may have education debts to repay and higher insurance costs to offset again their income.
The good news is there are lenders out there who understand the earning potential for barristers. They will factor in their potential earning power into the income multiples they offer and can you potentially borrow more than someone on the same money in another profession.
Can I get a mortgage as a barrister with 1 year’s accounts?
You may have spent years studying and once you’ve qualified you finally start to see the fruits of your labour and may want to buy a home now you have an income.
Most mortgage lenders require at least 2 years accounts to consider you for a mortgage, however some lenders understand the earning potential of barristers and will consider on just 1 year’s accounts. It’s the net profit they will consider, your income once allowable expenses have been deducted.
How long are my most recent accounts valid for?
Most mortgage lenders will consider accounts or tax returns that are no longer than 18 months old.
For example, your tax return for the year ending April 2023 can potentially be used as your latest years income until October 2024, assuming you’ve not already submitted 2024’s return.
How can Strive Mortgages help with mortgages for legal professionals and barristers?
If you’re in the legal profession, chances are you’re a busy person and finding time to arrange your mortgage on top on top of your already busy schedule can be tough.
We’ve got years of experience arranging mortgages for legal professionals and working with us will help you give you the best chance of success with your application.
We’ll also do all we can to work around you and your busy schedules and ensure the process runs as smoothly as possible.