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Carolyn Dunion talks us through NHS mortgages.
What is an NHS mortgage, how does it work and are there specific mortgages tailored to the NHS?
The actual mortgage product itself is rarely specific to NHS employees. What you’ll find is that the assessment of affordability and or criteria might vary from lender to lender.
For example, a dentist on a starting salary has a very clear salary projection. Some lenders will offer more borrowing than they normally would for the current salary, because they know the dentist is on a set career path. It’s more about how the lender views the applicant than the mortgage being specifically different.
Who is eligible for an NHS mortgage?
Obviously NHS staff, who are employed directly by the NHS. Some lenders may also consider self-employed NHS workers as well as direct employees of the NHS, but this varies over time.
What are the advantages of an NHS mortgage compared to a regular mortgage?
We can find that clients can access more borrowing than they might in a different career. It’s because NHS employees have quite stable employment, which makes the application process a bit easier. Sometimes there will be preferential rates for NHS staff, but this varies.
What are the potential drawbacks of an NHS mortgage?
There’s no drawback because you’re still getting a straightforward mortgage product. You might just get more borrowing.
One thing to be mindful of is if you are a dentist on a career path and the lender offers you more borrowing, but you decide you don’t want to be a dentist any more, you might find the mortgage is not affordable to you. You would want to factor in the longevity of your career. Other than that, there’s not really any downside.
Can you explain the application process for an NHS mortgage?
The application process is the same for everybody, whether you’re an NHS employee or not. We will be looking for a few months’ payslips, three months’ bank statements and all the usual ID documents.
If you are getting enhanced borrowing because of a career projection, the lender might ask to see a contract. If you’re self-employed they want to see evidence of your tax returns or the agreement you have with the practice you’re working for.
How can I find a lender that offers NHS mortgages?
The easiest way is to work with somebody like myself – an advisor who works with lenders across the marketplace. The offerings from lenders change very regularly, as they make decisions based on what’s happening in their business. If I were to look for an NHS deal today, I will probably find different products than in six months’ time.
It just saves an awful lot of research and disappointment if you come to somebody who’s got that information close to hand.
What are the typical interest rates and loan terms for an NHS mortgage?
At the moment there probably isn’t any difference in interest rates. Periodically they might offer a slightly preferential rate. But that’s at the point of application, and it’s certainly something we wouldn’t want people to rely upon because it can change.
If I spoke to somebody today who was looking for property, it could take them six months or even a year to find a home, by which time any beneficial products might no longer be on the market.
We would always try to find a good deal if it was available, but we would be giving initial advice based on what we’re typically seeing in the marketplace.
What documentation do I need to provide for an NHS mortgage application?
It’s the usual documentation – payslips and things like that. They might ask for your employment contract, or if you’re very new to a post or perhaps haven’t started yet, they might ask for an employer’s reference.
Usually that’s straightforward to get within the NHS – your HR department will help you with that.
Can I use an NHS mortgage to buy a property jointly with someone else?
Yes, you can. No problem.
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Does an NHS mortgage impact my affordability calculations and credit score?
Credit score is a little bit like witchcraft – we’re never very sure exactly how lenders are assessing that. They will factor in different industries that people work for and generally NHS staff will be seen as quite stable – they’re often employed by the NHS for the bulk of their career. There’s usually lots of career development, it’s a stable career and so that will be seen favourably. We can’t exactly measure that but it’s certainly an advantage.
With affordability calculations sometimes it’s possible to get more affordability if you’re on a particular career progression. That’s not the case for everybody that works for the NHS, and not with every lender, but it’s certainly something that we have a greater chance of achieving.
What happens if I am no longer employed by the NHS after obtaining an NHS mortgage?
Nothing would change immediately. As long as you maintain your mortgage payments, you don’t have to notify the lender. Where it becomes a point of of interest is when your product ends.
If you’ve taken, for example, a five-year fixed rate product and that’s due to end, we encourage everybody to review their arrangements. At that point we would be deciding whether to stay with your existing lender or whether to move to another.
If you were no longer employed by the NHS, you wouldn’t be able to consider any advantageous products for NHS staff with a new lender. But it’s not necessarily an issue. We would just be reviewing you like any other applicant.
If you stay with your existing lender, they will offer you products and they rarely assess your employment at that point. But if you are getting a preferential rate and you’re no longer with the NHS, it’s unlikely you’ll be able to obtain another preferential rate.
Can I port an NHS mortgage if I move to a different property?
It depends on the specific product, but for most products you can port. We always say not to rely on porting, because it involves a full assessment of you as an individual and your income, plus the property that you’re looking to buy.
It makes sense to do that if you’re still in a fixed rate product and there’s early repayment charges. If you port the mortgage you won’t incur those charges. Being an NHS employee won’t prevent you from doing that.
But you’ll still go through a full underwriting process and be assessed for affordability on the new property. If the lender is not happy with any part of that scenario they might decline the application to port. You’re not at any increased disadvantage as an NHS employee, however.
Are there any additional fees or charges associated with an NHS mortgage or as an NHS employee looking for a mortgage?
Generally not. It does come down to specific offerings and we would always assess that. I’ve not really seen additional charges in the marketplace. But if something like that were offered by a provider we would compare it with other more straightforward mortgages. That’s got nothing to do with your employment, and I haven’t seen that in the market so far.
How does the interest rate on an NHS mortgage compare to other mortgages available in the market?
Occasionally there are preferential rates – we saw it more when we came out of the pandemic. We’re now in a period of volatility with interest rates. Everything changes really quickly at the moment. If there were no preferential rates you would just be coming to the marketplace through somebody like me – we’ll see what the most suitable rate available is. [podcast recorded in August 2023]
What happens if I’m unable to make my mortgage payments on an NHS mortgage?
This is exactly the same for everybody. If you are finding it difficult to make your payment, you need to contact the lender as quickly as you can. Lenders are there to help make sure you stay in your property, so they will discuss options with you to try and manage that situation.
Everybody would hope that the difficulty was short-term. They might offer you a variety of different options including payment holidays, reduced payments or another strategy to help get you through that period of time.
If you don’t contact them and you just don’t make the payment, that’s when it can start to turn a bit nasty. It starts impacting your credit score and you can ultimately end up with debt recovery involved.
If you communicate with the lender they will try to help you. Obviously, nobody wants to be in that situation and it’s not pleasant to have to phone the lender and have that conversation, but they have specific departments set up for that. They will help you – that’s the same whether you’re an NHS employee or not.
How can a broker help an NHS employee get a mortgage?
Because the criteria, propositions and offerings from lenders change so regularly, it’s very difficult for you to find and compare the most suitable deals. It’s important to work out whether it’s genuinely a good offer or whether something not aimed at NHS employees could actually be better.
Somebody who understands the market can make those comparisons. It’s invaluable to have that conversation as early as you can, to clarify what is available to you and what’s genuinely advantageous to you.
Your home may be repossessed if you do not keep up with your mortgage repayments.