Professional Mortgages

If you work within a professional industry, you could be in an advantageous position when it is time to apply for a mortgage.

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What is a professional mortgage?

Professional mortgages are a specifically designed type of mortgage for individuals in certain esteemed professions.
Whilst many of those working in these industries often have irregular income structures, they are also seen as having a more consistent income stream and lower risk compared to many other industries.
Therefore, applying for a professional mortgage may unlock higher income to affordability multipliers.

How do they differ from traditional mortgage products?

Typically, a homebuyer’s affordability will be calculated at 4.5 times of the annual income, calculated as part of an ‘income multiple’. With certain professional mortgage products, the income multiple can be as high as 5.5 or even 6 times of the annual income.
Additionally, there will be extra identity verification steps as part of your mortgage application, such as providing proof of your membership of a relevant industry body.

Who is eligible for a professional mortgage?

Whilst every lender uses their own definition, broadly speaking to be eligible for a professional mortgage you will need to be fully qualified, registered, working within the industry and a member of the relevant professional association.
It is a common misconception that to be eligible for a professional mortgage you need to hold a degree. Whilst many working professionals are educated to a degree level, this is not necessarily the case. The common example given is that of pilots, who do not necessarily need to obtain a degree, but instead do require specialist training such as the Airline Transport Pilot Licence.
One characteristic of working professionals that is attractive to mortgage lenders is the structured and predictable career path. This enables lenders to more confidently predict your future earnings, therefore reducing risk.

Apply for an Agreement in Principle 

Examples of eligible professions for a professional mortgage

• Accountant
• Actuary
• Architect
• Barrister
• Chartered Surveyor
• Dentist
• Doctor
• Engineer
• Financial Adviser
• Nurse
• Optometrist
• Pharmacist
• Police Officer
• Solicitor
• Teacher
• Veterinary Surgeon

Fixed-rate mortgages

With a fixed-rate mortgage, you will keep your monthly mortgage repayments at a set rate for a certain period of time, typically ranging from two, three, five or in some cases ten years. At the end of this period, the lender’s standard variable rate will apply, which is typically much higher than the fixed rate deal that you would have been paying. Once your initial fixed-rate term has come to an end, it might be time to consider remortgaging.

Tracker mortgages

Linked to the Bank of England base rate, the amount of interest that you pay every month could rise or fall depending on if the base rate changes. Due to the potential repayment increases, it is important to budget whether you could afford the repayments if the interest rates rose.

Discounted variable-rate mortgages

Usually lasting between two to five years, a discounted variable-rate mortgage is fixed at a set percentage below the lender’s standard variable rate. However, whilst the discount is fixed, it is still linked to the standard variable rate so is still subject to price fluctuations.

Offset mortgages

An offset mortgage enables you to link a savings account to offset against the amount owed on the mortgage. Instead of earning interest on the savings, you pay less interest on the mortgage. Your savings balance is used to offset the amount owed on your mortgage, and as you only pay interest on the debt balance, this will reduce your repayments amount.

Which is the relevant professional registered body for each profession?

For some professions, such as Accountancy, there are multiple registered bodies which count.
These include but are not necessarily limited to:

● Institute of Chartered Accountants England & Wales
● Institute of Chartered Accountants Scotland
● Chartered Institute of Management Accountants
● Association of Chartered Certified Accountants
● Chartered Institute of Public Finance and Accountancy

This is similar for those who practise the law:
● Law Society of Scotland
● Law Society of England & Wales
● Law Society of Northern Ireland

In other professions, typically there is just the one professional body, these being:
● Architecture - Royal Institute of British Architects
● Barrister - The Bar Council
● Dentist - General Dental Council
● Doctor - General Medicine Council
● Pharmacist - General Pharmaceutical Council (GPhC)
● Pilot - Airline Transport Licence (ATPL)

If you are unsure as to which registered body you should be a member of on behalf of your
profession, simply let our team know during your free consultation and we can direct you
accordingly as part of the process for your mortgage for professionals application.

 

Frequently Asked Questions

What is the Loan to Value ratio?

Your loan to value ratio (LTV) is the amount you can borrow on a property compared to the total value of said property. Mortgage lenders will often have a maximum loan to value ratio that they are willing to offer. For example, if the lender is willing to lend 90% LTV on a £100,000 property, you will require a £10,000 deposit. 

What is the difference between repayment and interest-only mortgages?

If you take out a repayment mortgage, you will pay back both the amount you initially borrowed plus the interest with each monthly payment. By the end of your mortgage term, you will have paid off the total loan so will own the house outright. 

An interest-only mortgage will not pay back any of the original loan, only the interest on the loan. Whilst the monthly repayment will be significantly lower, at the end of the mortgage term you will still owe the lender the original cost of the property. If you are unable to repay the loan, you will likely need to sell your home. 

Should I choose a longer-term mortgage?

A longer-term mortgage will often reduce your monthly repayment amount, but increase the amount of monthly repayments that you have to make. You will also end up paying a lot more in interest overall by extending the term over more years. The standard term for a mortgage is 25 years, although an increasing number of mortgage lenders are offering up to 35 years. If you are looking to choose a longer-term mortgage, it is worth checking any associated overpayment / early payment penalties and charges. Overpaying can help you to shorten the length of your mortgage if you come into some money or receive an increase in income. 

How much of a deposit is required?

Many UK lenders have a minimum deposit requirement of 5%, however this is often only provided when the borrower has good affordability for the size of loan they are applying for.
Therefore, if you have an affordability issue such as a poor credit history, you may only be eligible for a lower loan-to-value ratio. This is because a lower LTV represents a lower risk to the lender.

How much can I borrow for a professional mortgage?

As previously stated, working within a specified professional field may allow you access to a higher income multiplier. This will increase your calculated affordability, opening up a larger house-hunting budget.
However, as with all mortgages, your own personal financial situation will have a significant impact on how much you can apply for.

Can I apply for a mortgage for professionals if I am self-employed?

Yes, self-employed professionals can apply for a mortgage. However, self-employed individuals are often seen as having a more inconsistent income compared to their employed counterparts.
Therefore, lenders for self-employed professional mortgages will often assess each case individually, rather than using a standardised income multiple.
Proving your income as a self-employed professional can also prove difficult. Be prepared to show:
● Two or more years’ accounts
● SA302 forms or an overview of the last three tax years
● If you are a contractor, be able to show upcoming contracts
● Evidence of dividend payments or retained profits

How to apply?

Working in a relevant applicable industry is not the only thing to consider before applying for a
professional mortgage. Other factors such as your credit score, lending history and income will
still play an important role in determining your mortgage affordability and eligibility for certain
mortgage products.

The steps to anticipate when applying include:
● Provide proof of a qualification awarded by a registered body in your chosen profession
● Proof of income
● Proof of deposit amount
● Proof of debt-to-income ratio falling below a specific threshold

Ready to discuss your Professional Mortgage application?

Our expert team is on hand to offer professional and tailored advice to ensure that you make the
best decisions regarding your home finances.
We are not tied to any specific lender so we can make sure that we help you to select the right
mortgage. Call us for an initial, free of charge consultation. There is no obligation to use our
services and you can either meet in one of our offices in Horsham or Southwater, or arrange a
phone based appointment.

Quick Mortgage Enquiry

YOUR HOME MAY BE REPOSSESSED IF YOU DON’T KEEP UP REPAYMENTS ON YOUR MORTGAGE OR OTHER DEBT SECURED ON IT