Locum Doctor Mortgages

Mortgages for locum doctors

Locum work is a great way to earn additional money with flexibility, and there is almost always a demand for this type of work,  While this can provide additional income and flexibility, there are still some challenges when securing a mortgage. 

What are the challenges of getting a mortgage as a locum doctor?

Although being a doctor is a highly regarded profession, locum doctors may face more hurdles than anticipated when trying to secure a mortgage.

This is mainly due to the inherent nature of their work, which does not provide a guaranteed income, and may have variations in income levels that require proof of their track record.

• Fluctuating Income: The variable nature of locum work can make it difficult for lenders to assess your income stability and ability to make consistent mortgage payments.
  Income Not Guaranteed: Unlike permanent employment, locum work does not offer guaranteed income, which can raise concerns for lenders regarding your ability to meet mortgage obligations.
  Insufficient Track Record: Many lenders require a minimum employment history of 1 to 2 years to demonstrate income stability. As a locum doctor, you may not meet this requirement, particularly if you recently started working in this capacity.
• Income Criteria: Some lenders may only consider a portion of your locum income when assessing your borrowing capacity, which can reduce the amount you qualify for.

Methods of pay

PAYE

For mortgage purposes, the income of PAYE NHS locum doctors is usually assessed based on their gross income. This income is averaged over a period of time, which can range from 3 to 12 months, depending on the lender.

The income may be assessed differently depending on the lender’s criteria and the length of time the borrower has been working as a locum doctor. Some lenders may consider all of the locum income earned by the borrower, while others may only take a proportion of it into account.

The proportion of the locum income that is considered may depend on various factors, such as the length of time the borrower has been working as a locum doctor and the stability of their employment.

Self employed Locum Doctors

If you are a self-employed NHS locum, the assessment of your income for mortgage purposes can differ from those who are PAYE locums or have a salaried role. As a self-employed borrower, the lender will assess your income differently and may require additional documentation to verify your income.

Typically, lenders will request your SA302 form and tax calculations for the last two or three years. These documents will provide evidence of your income and tax liabilities for each tax year. Additionally, lenders may require bank statements and invoices to verify your income.

When assessing your income, the lender may take into account the average of your earnings over the past two or three years, rather than using a single year’s income figure. They may also take into account any changes in your income over time, such as increases or decreases.

Some mortgage lenders may be willing to consider self-employed individuals, including NHS locum doctors, with just one year of self-employment history.

Limited company

If an NHS locum doctor operates as a company director, their income will be assessed differently for mortgage purposes compared to PAYE and self-employed locum doctors. In this case, the lender will assess the borrower’s income based on their salary and dividends.

The lender may consider the director’s salary and dividends received over the previous year or two to determine their income. The income will be assessed based on the company’s profitability, as indicated in the company’s accounts and tax returns.

Umbrella Company

If an NHS locum doctor is working under an umbrella company, their income will be assessed differently for mortgage purposes compared to PAYE and self-employed locum doctors. In this case, the lender will assess the borrower’s income based on the payslips received from the umbrella company.

How much can you borrow as a locum doctor?

Generally, mortgage lenders usually offer mortgages based on income multiples of  around 4.5 – 5 times income, potentially as high as 5.5 times for higher earners. However, the mortgage amount available to locum doctors will depend on factors such as; 

Lender criteria: Different lenders have varying policies on lending to locum doctors. Some may consider the entire income, while others may only consider a percentage of it.

Income calculation: The method of calculating income can vary based on factors such as the timeframe considered (e.g., 3, 6, or 12-month average) and whether the doctor is employed or self-employed.

Credit score: The borrower’s credit score plays a significant role in determining the loan amount. A higher credit score generally increases the chances of securing a larger loan. 

Deposit level: The size of the deposit placed by the borrower can influence the loan amount. A larger deposit may lead to a higher loan approval.

Income level: Higher income levels can result in higher income multiples, allowing for larger loan amounts.

What if you’ve been a locum doctor for less than two years?

Yes, it’s possible to get a mortgage as a locum doctor even if you have been working in that role for less than two years.

However, the eligibility criteria and the amount that a lender is willing to lend may differ based on the length of time that the borrower has been working as a locum. Some lenders may require locum doctors to have a minimum of two years’ experience before considering them for a mortgage.

However, other lenders may be willing to consider applicants who have been working as a locum for less than two years. Some mortgage lenders may accept NHS locum income with as little as three months’ history, provided the borrower has previous experience in their line of work.

Can I use l doctor locum income as well as my salaried income?

Lenders may consider the income earned from a locum role in addition to the borrower’s salaried income. This additional income may significantly impact the amount that a lender is willing to lend.

However, it’s worth noting that the way in which lenders treat locum income can vary widely. Some lenders may consider the entire amount earned from locum work, while others may only take a percentage of it. Therefore, the lender’s criteria can significantly affect the final amount that the borrower is eligible to borrow.

How can you improve your chances of success with your mortgage as a locum doctor? 

By implementing these strategies, you can enhance your chances of securing a

Timing: Apply for a mortgage when you have had a period of strong earnings. This will provide a more accurate reflection of your income and increase your borrowing capacity.

Find a Specialist Broker: Work with a mortgage broker who specialises in mortgages for doctors, including locum doctors. They will have expertise and knowledge of the unique challenges and requirements you may face, increasing your chances of success.

Length of Employment History: While it is possible to secure a mortgage with a shorter employment history as a locum doctor, having a longer track record can provide more options and increase your eligibility with certain lenders. Aim to build a solid employment history if possible.

Increase Deposit: Save for a larger deposit. A higher deposit can reduce the perceived risk for lenders and improve your chances of mortgage approval. It may also provide access to more favourable interest rates and mortgage terms.

What is the process for applying? 

The process of securing a mortgage as a locum doctor typically involves the following steps:

Find a Mortgage Broker: Look for a mortgage broker who has experience working with locum doctors. They will have knowledge of the unique challenges and requirements associated with your profession.

Gather Required Documents: Collect all the necessary documents to support your mortgage application, including proof of identification, income documentation (such as locum contracts, invoices, payment records, and tax returns), bank statements, credit history, proof of assets, employment history, and personal/professional references.

Obtain Decision in Principle (DIP): A DIP, also known as a mortgage agreement in principle or mortgage pre-approval, is a preliminary assessment by a lender indicating the amount they are willing to lend you based on an initial evaluation of your financial circumstances. It helps you understand the potential borrowing capacity before submitting a full application.

Maintain Updated Income Documentation: As a locum doctor, your income can fluctuate. Keep your mortgage broker updated with new pay slips each time they arrive. The amount you can borrow is typically based on the latest pay slips prior to the application. Thus, if your income varies, it can impact the borrowing amount.

Submit Full Mortgage Application: Once you find a suitable property and have all the necessary documentation ready, your mortgage broker will help you complete and submit the full mortgage application to the lender.

What documents do I need? 

When applying for a mortgage as a locum doctor, you will typically need to provide certain
documents to support your application. While specific requirements may vary
among lenders, here are some common documents you may be asked to provide:

• Proof of Identification: Valid government-issued identification, such as a passport or driver’s license, to verify your identity.
• Proof of Income: As a locum doctor, you will need to provide documentation to
  demonstrate your income. This may include:
• Locum Contracts: Copies of your locum contracts, which outline the terms of your temporary employment.
  Invoices or Payment Records: Documentation showing payments received for  your locum work.
• Tax Returns: If you’re a  self-employed Locum doctor  – Personal or business tax returns for the previous 1-3 years to verify your income.
• Employment History: Details of your locum work history, including the duration of your contracts and any relevant experience.
  Bank Statements: Recent bank statements (usually covering the past 3-6 months) to provide an overview of your financial transactions and demonstrate your ability to manage your finances.

How can Strive Mortgages help? 

A mortgage broker can be a valuable resource for locum doctors who are looking to secure a mortgage. Here are some of the ways that a mortgage broker can help:

Understanding the lender’s criteria: A mortgage broker can help the locum doctor understand the different criteria that lenders use to assess their income.

This can include how the locum income is treated, the length of time that the borrower needs to be working as a locum doctor, and other factors that can affect their ability to get approved for a mortgage.

Finding the right lender: A mortgage broker has access to a wide range of lenders and can help the locum doctor find the right lender who is willing to consider their locum income.

This can save the locum doctor time and effort in researching different lenders on their own.

Completing the mortgage application: A mortgage broker can help the locum doctor complete the mortgage application and ensure that all the necessary documents are provided. This can reduce the likelihood of errors or omissions that could delay the application process.

Negotiating with the lender: A mortgage broker can negotiate with the lender on the locum doctor’s behalf to get the best possible mortgage terms.

This can include negotiating a lower interest rate, a higher loan amount, or better repayment terms.

Providing ongoing support: A mortgage broker can provide ongoing support throughout the mortgage process, including answering questions, providing updates, and helping the locum doctor understand the mortgage terms and conditions.

A mortgage broker can be a valuable resource for locum doctors who are looking to secure a mortgage. They can help the locum doctor understand the lender’s criteria, find the right lender, complete the mortgage application, negotiate with the lender, and provide ongoing support throughout the mortgage process.

For more information on mortgages for locum doctors, please contact a member of the Strive team, by emailing info@strivemortgages.co.uk or call us on 01273 002697.