Mortgages for Locum Doctors
Mortgages for Locum Doctors
Mortgages for locum doctors are readily available so long as you approach the right lender. Getting a mortgage as a locum doctor can be made unnecessarily complicated if the lender you apply to does not really understand locum work. Thankfully, there are a few lenders who excel in this area though.
Please be aware that by clicking onto the above link you are leaving the Jamie Thompson Mortgages website. Please note that neither Jamie Thompson Mortgages nor PRIMIS are responsible for the accuracy of the information contained within the linked site accessible from this page.
Last updated: 23rd October 2024
Can you get a mortgage as a locum doctor?
Absolutely. Your application will be viewed differently to your fully employed colleagues by most lenders though. Most banks want simple to understand, regular income and the world of locum work does not always provide this.
Do not be put off if you have been told you cannot get a mortgage due to your status as a locum doctor. This includes if you have been told this by a bank or another mortgage broker. It’s more likely that the lender or broker who said this does not specialise in the intricacies of your situation, especially if you have not been locum for long.
How long do you need to have been a locum doctor to get a mortgage?
The very best mortgage lenders for locum doctors require just three months as a locum.
At the other end of the scale there are lenders that would require two full years tax returns. If you start working in May of 2024 as a locum this would mean you will not have two full years of self-employed accounts until April 2027. Using the right lender can therefore bring your house purchase forward by a whole 20 months.
The longer you have been a locum doctor the more lenders will become available to you. More options usually mean access to lower cost mortgages, though duration of being a locum isn’t the only driver of this. Deposit size can have a larger effect on interest rates than time as a locum.
How much can a locum doctor borrow?
This will depend on your specific situation. It will also hugely depend on how your application is presented to a lender, and to which lender. How much you want to borrow will determine which is the best lender to apply to as their treatment of your circumstances varies hugely.
As a rough guide, most locums will be able to borrow up 4.5 times their annual income. In many cases this could be much higher though, with 5.75 times being readily achievable in the right circumstances.
For your situation, a crucial factor in how much you can borrow is how your income is presented to a lender. For example, one lender may calculate your income looking at your last 3 months of invoices, annualise this, and multiply it by 4.5 to calculate your maximum borrowing amount. Whereas another lender could take your last two years net profit on your tax returns, average then, and multiply by 5.75. Therefore, it could be that case that you can borrow more with a lender with lower income multiples if they are looking at a period when your income is higher.
Examples
Applicant one shows a tax return with a net profit of just over £75,000 for each of the last two tax years. They invoice £6,500 per month and have approximately £250 per month in operating expenses.
Lender A may lend them up to 5.75 times their last two years average annual net profit. £75,000 x 5.75 = £413,250
Lender B is more interested in their last 3 months invoices to assess income. This would be £6,500 (they can even ignore expenses) multiplied by 12 months, multiplied by 4.5. That’s £6,500 x 12 x 4.5 = £351,000 to exactly the same applicant.
That’s a difference of £62,250, or 17%, just by approaching the right lender. Of course, to access Lender A you need to have been receiving Locum income for a lot longer than Lender B who could consider a locum after just 3 months.
There are cases where Lender B could lend more than Lender A though.
Applicant two has two years tax returns with the previous one showing £50,000 and the most recent one showing £90,000. However, since their last tax return, their invoiced amount has increased to £7,750 per month for the last 3 months. Lender A, the same Lender A as above, would now lend only £350,000 even though applicant two’s income is now higher than applicant one’s income. Whereas Lender B can now lend up to £418,500. Lender B could consider this even if applicant had only been a locum for 3 months.
This example shows how applying to the right lender is dependent on your exact circumstances.
There are many lenders who would lend much less and even zero in the situations outlined above.
The most accurate way to find out what you can borrow is to have a mortgage broker who specialises in locum doctors review your details and explain the best way to present this to a lender to achieve your goal. Remember, to do this properly the mortgage broker must have reviewed all the relevant documents beforehand. If somebody has offered to get an agreement in principle without reviewing all documents, they cannot provide a truly accurate figure to you and risk leaving you disappointed when a full mortgage application is submitted.
Can locum income be used alongside employed income?
Absolutely. Some lenders will look at your basic income from your employed role, plus any variable income from the last three months, annualise it, add your locum work for the last three months, annualise it, and use this figure when calculating your income and determining how much you can borrow.
Different lenders will then apply different multiples and have different tolerances of how much other debts will affect totalling borrowing amount.
What deposit size is needed when applying for a mortgage as a locum doctor?
A locum doctor can get a mortgage with a deposit as low as 5%. This can even be the case on a new build house and with the right circumstances even a new build flat.
A larger deposit usually opens up lower interest rates and many lenders are often willing to lend more if a larger deposit is used. Again, the variation is huge between lenders with some lenders limiting people using a 5% deposit to borrowing just four times their income, and others being willing to lend six times income, though to borrow six times you would likely need to be employed.
Acceptable sources of deposit
Deposits can be from your own savings, saved from income, or gifted from immediate family members such as parents, grandparents, and siblings. There can be some discretion around this. There are lenders that accept a gift from anyone and even a loan as an acceptable for of deposit. These lenders are not as good with other aspects of locum doctor mortgages though, such as favourable treatment of income and time receiving an income from locum work.
All deposit funds need to be in a UK bank account or other UK investment platform at the time of application, unless being gifted, in which case a letter confirming the gift would be required by the broker, lender, and conveyancing solicitor.
Are mortgage interest rates higher for locum doctors?
In many cases not at all, and I have never had it to the extend where somebody decide not to proceed. Depending on your exact circumstances you could get the very best rate out there. This would usually require having been a locum for more than two years.
Doctors who started locum work more recently may end up with a slightly higher interest rate than had they been directly employed by the NHS for example, but not to a large extent. We are talking tens of pounds a month difference in most cases. In many cases that I see, had the locum stayed employed their income and borrowing ability would have been much lower.
What if I locum at different places?
This is fine. The very best lenders for locum doctors simply look at your invoiced earnings over a specified time period, regardless of who you have worked for.
Do I need to have completed a tax return for my locum income?
No. There are lenders that can consider a mortgage application from a doctor who has only been doing locum work for 3 months and will base their income over this period.
Having two years SA302s and Tax Year Overviews can open the door to more lenders, though it is not essential.
What documents are required?
As an absolute minimum the following will be required:
- Last 3 months invoices
- Last 3 months personal bank statements
- Last 3 months business bank statements (where paid into a business account)
- Proof of deposit
- In a UK bank account or a gifted deposit letter
Where an applicant is not a UK or Irish citizen then proof of right to remain in the UK will be required.
Although not mandatory, the following documents can help you access more lenders:
- Last 2 years company accounts
- Last two years SA302s (tax calculations)
- Last 2 years Tax Year Overviews
- Contract of engagement
I will also ask for a budget sheet to be completed as well as a copy of your credit file.
Is it better to be a salaried doctor that a locum doctor to get a mortgage?
So long as you approach the right bank, applying as a locum doctor is not going to be a problem most of the time. It is easier as a salaried doctor to get a mortgage with the average bank, yes. That’s because banks like simple, regular income that fits nicely into their lending policy. However, as you have more influence over your earnings it can be easier to get the mortgage you need as a locum than as an employee. The employee may be more likely to get any mortgage with any bank, but a locum earning more in the last 3 months is often able to borrow more to actually get the property they want.
If you are thinking about taking a new salaried job read about how new jobs affect getting a mortgage or how fixed term contracts affect getting a mortgage.
Can a first-time buyer qualify for a locum doctor mortgage?
Absolutely. First time buyers can get a mortgage as a locum doctor. The information on this page applied to first time buyers, home movers, people remortgaging for the same amount or borrowing more.
If you are a first time buyer remember you may be able to the the Lifetime ISA to increase your deposit.
Please be aware that by clicking onto the above link you are leaving the Jamie Thompson Mortgages website. Please note that neither Jamie Thompson Mortgages nor PRIMIS are responsible for the accuracy of the information contained within the linked site accessible from this page.
Buy to let mortgages for locum doctors
As buy to let mortgages are not assessed against an individual’s income, being a locum should not prevent you from getting a buy to let mortgage. This is because the mortgage is assessed against the valuation of the property being mortgaged, and the expected market rent of the property.
That being said, many lenders do have minimum incomes for buy to let mortgages and to meet this you may need the lender to accept income in a certain form.
What if your pay has recently changed?
If your pay has recently increased, whether by working more or an increase it your rate, this can be capitalised on by using the right lender.
With a non-locum specialist lender who looks at two years net profit, a recent increase in income will have no affect. With a lender that just considers your last 3 months earnings however, this increase in income can be used to increase your borrowing amount right away.
The increase needs to be sustainable though. If a recent increase in income is due to you working excessive hours, say above 48 per week, I would not expect this to be acceptable.
Do I need to have set up a limited company?
No. You do not need to have set up a limited company to have your income from being a locum doctor considered when applying for a mortgage.
Non-British locum doctors
Many lenders have restrictions on who they lend to, or how much they can lend, to people who do not have indefinite leave to remain in the UK, or have not been in the UK for specified periods.
Don't have indefinite leave to remain?
This is still acceptable with the leading mortgage lenders for locum doctors. Success will depend on how long you have been in the UK and how long you have left on your visa.
If you have two years UK address history, and 12 months remaining on your current visa then there are locum friendly lenders available to you with just a 5% deposit. The 2 years UK address history and 12 months remaining can even be flexible where the is a good case. If you have only been here for 18 months, or only have 10 months left on your current visa it can still be possible.
Many lenders will either not lend anything to somebody in this situation, and most that do insist on a 25% deposit. This is another reason to be sure you are approaching the right lender first time.
Some lenders are happy with as little as a 5% deposit so long as just one applicant on the mortgage has indefinite leave to remain. These lenders are not the very best for income from locum work, but they can still consider you.
Read about mortgages while on a spouse visa.
Less than 3 years UK address history
Some lenders approve mortgages from day one of being in the UK. In reality this is dependent on already having a good credit footprint in the UK so is only really likely if you are returning to the UK.
If you have been in the UK for 12 months, it is quite likely that you can qualify for a mortgage and it is possible below this too. Once you have been here for 24 months you have access to the most locum mortgage friendly lenders. That’s the lenders that can often lend the most or require the shortest period of income from locum work.
Pre-settled status
This will not impede your ability to get a mortgage with most lenders. Read more about applying for a mortgage with pre-settled status.
How much does mortgage advice cost for locum doctors?
I charge £390 to locum doctors seeking a mortgage. For this I will conduct a fact find to understand your circumstances, review all relevant documents, and only when I am certain we can prove to the lender what would be needed at a full mortgage application, get you an agreement in principle that you can be confident is worthwhile. This is important as you could get an agreement in principle for a million pounds but without the right documentation for the right lender it is absolutely worthless.
Your home may be repossessed if you do not keep up repayments on your mortgage
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