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Author: Elliott Culley - Director & Mortgage Adviser of Switch Mortgage Finance
It is common to be employed by the NHS on a fixed term contract and many individuals take up these roles without realising the potential consequences when it comes to qualifying for a mortgage. It is commonplace for medical professionals to have difficulty finding a lender that accepts fixed term contract income.
Most professionals find themselves on NHS fixed term contracts throughout their medical careers, with it being more common in junior doctors. If you are on a fixed term contract you can have some extra challenges when it comes to obtaining a mortgage as lenders criteria differs. However, there are lenders in the market that make the process far easier for an NHS fixed term contractors.
What is a Fixed Term Contract?
A fixed term contract is when an employed individual has a contract in place with a company which has a set start and end date. Mortgage lenders will see this type of employment as not permanent and as a result some lenders have different criteria. Some mortgage lenders don’t apply these rules to NHS professionals with fixed term contracts, because there is a clear pathway for work to continue and income to increase.
Can I Get a Mortgage on an NHS Fixed Term Contract?
Yes, you can obtain a mortgage with a fixed term contract. Not all mortgage lenders are flexible when it comes to this type of income. If you have recently moved into a fixed term contract role, then you need to ensure you approach the correct mortgage lender.
Likewise if your current contract is to expire soon, you will find a mortgage lender harder to source. Mortgage lenders have different criteria and depending on your role within the NHS, some lenders may be more suited than others.
Real Case Scenario
A client came to us after having their mortgage with Halifax declined due to the time they had been fixed term contracting. The client was only 1 month into her first fixed term contract with the NHS after graduating and wanted to purchase a shared ownership property. We were able to find a lender that would consider shared ownership and the client’s short history of fixed term contracting.
Is it Hard to Obtain a Mortgage on an NHS Fixed Term Contract?
It can be hard to obtain a mortgage on a fixed term contract, if you don’t know which lender to approach for your personal circumstances. A clinical staff member will find it easier than staff in administrative roles to obtain a mortgage on an NHS fixed term contract.
If you do work for the NHS in a more administrative role then there are still many lenders that will consider your income.
We have access to lenders that can consider your fixed term contract from as little as 3 months into the role. Infact if you were previously in an employed role with the NHS, some lenders will be happy to consider you even if you have just started the contract.
We even have one lender that will consider you three months before the contract has started!
Speak to an Expert!
Contact us today for expert advice and guidance on your unique mortgage and property needs. We will work with you on a one-on-one to basis to help you find the right solution for your needs.
With our experience you can rest assured that you are in good hands when it comes to securing the financing you need for your property.
How Many Years of Fixed Term Contract Work Do I Need Before Getting a Mortgage?
Even if you are an NHS professional who has just started your first contract, it is possible to find a mortgage lender willing to accept you as an applicant. They will just require your latest payslip and a copy of your contract.
Not all mortgage lenders take this stance. Some will require at least 12 months history and a renewed contract before accepting you as a client. Therefore, approaching the right lender for your circumstances is key.
Real Case Scenario
A client came to us after having his mortgage declined by Nationwide. The client had started his first fixed term contract role in the NHS and had been in the role for three months. We were able to secure a mortgage for the client with a competitive mortgage lender within 2 days. The mortgage lender was happy to accept the short history of working on a fixed term contract due to the history of fixed term contracts used in the NHS.
Getting a Mortgage as a Junior Doctor on Your First Fixed Term Contract
There are mortgage lenders that have specific products to assist junior doctors. You might find most mortgage lenders will want a 12-month history of fixed term contract work. However, there are lenders who only require a copy of the contract and your most recent payslip. There are mortgage lenders that can also potentially lend you more due to your potential for significant pay increases over the next few years.
How Long Do You Need Left on an NHS Fixed Term Contract to Get a Mortgage?
Dependent on the lender, some will be happy with as little as three months left. Most lenders will want further security such as evidence of a renewal contract or evidence of a new fixed term contract at a different department.
If you have more than six months remaining on your fixed contract at the time you apply you will have a wider array of lending options.
Do You Need to Have Had a Contract Extension to Get an NHS Fixed Term Contract Mortgage?
No, you don’t need to have had a contract extension, but it will increase the lenders available to you. The majority of lenders want a 12 month history of contracting. As most contracts are for 12 months, you can see why you might need a contract extension.
As an NHS professional you don’t necessarily need to have a contract extension or even a 12 month history to obtain a mortgage. However having a contract extension in place if you are near the end of the contract will increase the lenders available to you and as a result maybe a better mortgage rate.
How Much Can You Borrow on an NHS Fixed Term Contract Mortgage?
If you work as a Doctor, Nurse or Dentist there are lenders who can use enhanced income multiples to help increase your borrowing capacity. Not all will do this, so if you are looking to borrow that bit extra then you need to approach the right lender.
Most mortgage lenders start at a 4.49x your annual income. However, as a professional you could increase this with some lenders potentially going as high as 6x your income. This could make a significant difference to your borrowing capacity.
Can You Get an NHS Fixed Term Contract Mortgage Before the Contract Begins?
Yes there are lenders that can start an application with you before you have started your role. This is aimed at junior doctors rather than administrative roles within the NHS. Provided you can show the contract on submission and commence the role before the mortgage starts, some mortgage lenders will be happy to start the process in advance.
Can I Use My Pay Rise to Get a Bigger Mortgage?
For doctors who have completed their first year of training (F1 UK Foundation Programme), some lenders can consider any higher income on an onward contract for affordability purposes.
Are Interest Rates Higher for NHS Fixed Term Contract Mortgages?
No, you will have access to the same rates as PAYE customers, and in fact as a professional you may have access to more enhanced rates from certain lenders.
However, it is worth noting it does depend on your circumstances. If you have a specific set of requirements you may find you will have to pay a higher rate, to use a specialist lender.
What Deposit do I Need for a Fixed Term Contract Mortgage?
You will be able to get a mortgage with as little as 5-10% deposit. A larger deposit will mean you can access lower interest rates. Larger deposits will be needed if you are buying a new build flat, new build house or a second hand flat.
What Documents Will I Need to get a Mortgage?
If you are on a fixed term contract you will need to provide your latest payslips, a copy of your contract and potentially your renewal letter if you are close to the end of your current contract.
If you want to use any overtime as part of your income for the mortgage then you will also need to provide a p60.
Can I get a Mortgage as a First Time Buyer?
Yes, there are many mortgage lenders who are happy to offer mortgages to first time buyers on fixed term contracts. You just need to make sure you apply to the mortgage lender that suits your personal circumstances.
Can I Get a Buy to Let Mortgage as a Fixed Term Contractor?
Yes it is certainly possible to obtain a buy to let mortgage if you are on a fixed term contract. Some mortgage lenders do have a minimum income of £25,000 per year that you will need to earn, but some require no minimum income at all.
If this is your first time being a landlord or you are a first time buyer, then there are some lenders that will not consider you, but there are plenty that will.
Can I Get an NHS Fixed Term Contract Mortgage With Bad Credit?
Yes it is possible to get a mortgage even with bad credit. It would completely depend on the severity of the bad credit, and your current position. It is always worth enquiring to see what your options are.
Why Choose Switch?
Hopefully the guide above was useful and explains why it can be difficult to get a mortgage whilst on a fixed term contract.
At Switch we are confident in our ability to obtain the right mortgage to suit your personal circumstances. We have experience in dealing with this type of enquiry and why would you want to waste your time potentially speaking to the wrong mortgage lender.
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