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Mortgage for Solicitors, Lawyers and Barristers
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PLEASE NOTE – Rose Capital Partners are in the process of merging with Heron Financial, therefore it will be best for Heron to pick up your enquiry from here. Please do use the link here to book in with the team but if you have any concerns, please call us on 020 7935 7866 or contact info@rosecp.co.uk
The content contained within was correct at the time of publication but is subject to change 12/12/2023.
Mortgage for Solicitors, Lawyers and Barristers
Richard Campo talks us through the mortgage process for lawyers, barristers and solicitors.
Are there specific mortgages for legal professionals such as solicitors, lawyers and barristers?
Yes, but it also depends on how you define specific mortgages. You don’t often find products badged as professional mortgages. More commonly it comes through in the lenders’ criteria, where they are more open-minded in how much they’ll lend you and might overlook historic issues.For solicitors, barristers and lawyers, how their pay works for those is slightly different – we’ll expand on that shortly.
What type of mortgage deals are available for legal professionals? Are there exclusive deals for law firm partners?
It changes in time, but some lenders do offer special products depending on where they are in the market. There are two lenders at the moment that do offer specific products – but it’s generally more in the criteria.For law firm partners, that’s a slightly different thing. At a law firm you might be an employee, a partner or self-employed. Depending on which you are, we’ve actually got specific pages on the website that relate to those things.
It’s more common that a partner of a law firm works within an LLP for example – you get drawings rather than income. The tax position is different and assessment is different. So to explore that in more detail look at the LLP section of the website. With barristers, as we will come onto, that’s a different type of self-employment entirely.
How do I know if I’m eligible for a mortgage designed for legal professionals?
You are fully qualified and you’re in a certain role – for example, you’re practising law in a law firm. It can’t be that you’re a lawyer but you’ve had an epiphany moment and you’re now teaching yoga. You wouldn’t qualify under that.You can still get a mortgage, depending on what your income is, but you don’t get preferential treatment – you have to be practising in the field currently to qualify for a legal professional mortgage.
What are the main issues affecting solicitors, lawyers and barristers obtaining a mortgage?
If you’re a lawyer and you’re employed, that’s really straightforward. You tend to get preferential treatment from a lot of banks, who will often lend you more.If you are a partner in an LLP, as I touched on, you might need more of a track record. If you’ve just got promoted to partner of a law firm, that’s normally a huge boost to your income. It’s really positive for you and normally a catalyst to go and buy a nice big house.
But then you butt up against the fact that you are self-employed now. It’s treated differently, and becomes more complicated. But there are easy ways around this. We can get a letter from your financial director confirming what the package is.
If it’s a proportion of the shares of the business that you’re coming into – like the magic circle firms – you have a very nominal shareholding but obviously it’s still hugely profitable. Or it might be that you’re creating your own practice. That’s more traditional self-employment.
So there are exceptions, particularly for lawyers because that transition tends to come off the back of a proven career where you have a track record. That will make some banks far more amenable. They won’t need a 2-3 year track record of you being self-employed – they can do it straight away.
In the case of an LLP you are setting up and you’re in practice, you really would need a minimum one year track record. But again, if we can evidence your previous career, some banks will be really quite flexible.
Can I still get a mortgage if I’m a trainee solicitor, lawyer or barrister? Can I get a mortgage if I’m newly qualified?
If you’re newly qualified, you get all the benefits that come with that. If you’re training, you can get a mortgage, but it’s a regular mortgage. You won’t be deemed a professional yet.It might be that your income is sufficient anyway, or you’re buying with somebody else or getting some help from family. In that case it can still work. If you’re not pushing the boundaries we can often just get you a regular mortgage. We’ll always ascertain what’s best for you.
Whether we do or don’t go down the professional part is secondary. It’s really about what you want to do and finding the best home.
What eligibility criteria do I need to meet as a solicitor, lawyer or barrister?
The main thing is that you’re fully qualified and in the role. It’s as simple as that.How is mortgage affordability assessed for barristers, solicitors and lawyers?
If you’re employed, most banks would go up to a maximum of six times your income. With £100,000 income you could borrow £600,000 – that’s nice and straightforward.If you’re part of an LLP you will have drawings. We just need to figure out whether it’s gross or net. Most banks will work on the gross position – particularly if it’s a larger firm – and then you’re liable for the tax on that.
A letter from the FD is a nice way of going about that. If you’ve been under an LLP structure for many years, we might just need your tax returns. A really helpful document is your SA302 – the last two of these can get you the lending that you want with a bank.
If you are self-employed within a limited company or as a sole trader, because they’re quite in depth, specific points I’d suggest you look at those pages of the website because the assessments are very different.
What is my borrowing potential as a lawyer for my mortgage? Can lawyers borrow mortgages up to six times their income?
Yes, some people can borrow up to six times income. It depends. We’re in November 2023 and are potentially at the top of this interest rate cycle, with the Bank of England base rate at 5.25%.Few lenders are going that far with lending right now. Even if you could borrow six times your income, you’ve got outgoings – even the energy bills at the moment are outrageous. It does become more difficult, the higher the interest rate. If interest rates are lower, banks are willing to go further – and vice versa. That’s the general relationship.
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Can I get a mortgage for seven times my salary as a solicitor, lawyer or barrister?
It depends – it all goes down to the assessment. From a tax perspective, what’s affordable might be different if you’re self-employed or part of an LLP. It depends what banks consider to be your income.
It’s really about each specific person’s situation. The exact figure will be down to how much you want to borrow and how much deposit you have. There’s a lot of caveats in there, but it’s something we can certainly help you with.
What if I’m a self-employed solicitor, lawyer or barrister? Is a barrister a sole trader?
I’m getting nostalgic for my first job in 1999 when I worked at Cheltenham & Gloucester in Holborn. I spent a lot of time running down to Chambers and picking up mortgage applications from barristers. I got to understand barristers quite well.
They work on a concept called ‘aged debt’ which is very unusual. Court cases can go on for many years and it can take years to collect the fees. Going to the Bar is a different way of working entirely.
You typically work under a chamber and more often than not barristers are sole traders within that chamber. Around 18% of barristers are employed, so that means 82% are self-employed. While there is information on our website around sole traders, it’s less relevant in this instance because of the aged debt.
Banks will go further, because over time barristers’ income steps up. You build your reputation and your client bank. You might say that this year I’m going to earn X, but next year and the year after I’m going to earn a lot more – and I can prove it. Banks understand that, which is why it’s very different for barristers.
Do barristers pay income tax?
It’s always a good idea to pay tax! The ins and outs of that is really down to your accountant. So if there’s any uncertainty on this, speak to an accountant as soon as you can.
Tax rates change over time and we certainly don’t advise on that. But if you have recently gone to the bar or or taken that path, speak to an accountant. We will direct you to somebody if you need a recommendation.
Can you get a better mortgage as a solicitor, lawyer or barrister?
It depends what you call better. Is a really big mortgage better?
Lenders are very amenable to barristers and lawyers because it’s a very solid profession. It tends to be recession-proof. People have a long track record of earnings and they tend to go up in time. It’s a well-trodden path. So you can push the boundaries a bit more.
Occasionally some banks do have better products, but we tend to find that banks just have preferential criteria or treat you more favourably than someone who’s not a professional.
Will my student loan for my law degree affect my mortgage application?
Yes, but not adversely. Banks look at ‘affordability’. They don’t just look at your income, they also look at your outgoings.
So if you had a £100 a month student loan, that’s factored into the monthly budget and would probably decrease what you can borrow slightly. If you’ve got debts, childcare commitments etc., it’s all put in that affordability mix.
It is quite complicated these days because it’s dependent on your age, your credit profile, your deposit… many factors that roll up in the affordability piece. That’s why it’s very important to speak to a broker – we can figure that stuff out pretty quickly.
Can I get a mortgage in the UK if I’m a solicitor earning in a foreign currency?
Some banks will work with foreign currencies. It’s a sliding scale. If you are resident in the UK and paying tax here you have more options. if you are not resident and not paying UK tax you have less options.
Brexit rears its head at this level, because there’s a very strict requirement that you need to be in the UK to receive financial advice. If you are here practising law or will be here at some point and buying a property that’s normally self-fulfilling.
Fewer lenders are currently offering anything to do with foreign currency. When they do, they apply a ‘haircut.’ Let’s say your income is £100,000. Banks may not assess that £100,000. They might take a 15% or 20% haircut and work on £85,000 to allow for currency fluctuations.
So, depending on residency and the haircut, there are banks that do it – it’s possible.
What are the benefits of applying for a mortgage as a solicitor, lawyer or barrister with a lender?
The pros and cons are often the same – you can borrow more. That’s a pro and a con. The main thing is that you are deemed less risky to the bank. You’re more likely to be approved and you probably could borrow more than somebody else not in the same position.
It goes back to what you want to do. In most cases people don’t push the boundaries, so it doesn’t come up too much. But as a simple rule, banks love professionals. They love lawyers and barristers and so your application will be looked at more favourably.
How much stamp duty will I have to pay as a solicitor, lawyer or barrister?
Stamp duty rates change in time and vary if you’re a First Time Buyer or not. Depending on when you’re listening to this it’s probably best to use an online stamp duty calculator.
That’s the best thing to do, because it does change. Not frequently, but it has changed over the last few years, so that’s the best way to figure out how much you need to pay.
How can a mortgage broker help me get a mortgage as a legal professional?
It’s like anything – if you don’t know what you’re doing, it’s complicated. But we do know what we’re doing.
Just to pick on the barrister example – if you’re in the middle of a court case or having a very intense day, you don’t want to be trudging off to the bank or trying to dig out bank statements or whatever. Let us manage that for you.
We can save you a lot of time. We can prime the questions the bank’s going to ask and get things packaged nice and neatly so that you can focus on your very important work. Let’s just make your life a bit easier.
Your home may be repossessed if you do not keep up with your mortgage repayments.
The content contained within was correct at the time of publication but is subject to change 12/12/2023.