Home Loans for Health Professionals | May 2021 | RateCity
Most Australian lenders see health workers as low-risk borrowers and as such, offer special home loans for health professionals. See what benefits you can get.
Benefits of home loans for health professionals
Applying for a specialist health professional mortgage could allow you to enjoy one or more of the following benefits.
No Lender’s Mortgage Insurance (LMI)
Other special offers may be available to health professionals applying for home loans.
A lower deposit/ higher Loan to Value Ratio (LVR)
Special offers may be available to health professionals applying for home loans.
Lower interest rates & discounted fees
Other special offers may be available to health professionals applying for home loans.
Who is eligible for health professional home loans?
- Anaesthesiologists & anaesthetists
- Cosmetic surgeons
- Doctors, Intern Doctors & General Practitioners
- Plastic Surgeons
- Psychiatrists & Psychologists
Of course, you will still have to meet the lender’s other requirements, such as having enough money saved for a security deposit, and having a reasonably good credit record.
Some of the top benefits of health professional home loans include:
- Borrow up to 100 per cent of the property value without paying LMI
- Access special interest rates for low-risk borrowers
- Specific lenders may offer additional discounts and fee waivers
- Get into the property market earlier without waiting to save a 20 per cent deposit or getting a guarantor
Are there specific home loans for healthcare workers?
Healthcare professionals are universally respected for providing an essential service that helps people and can saves lives. They’re also among the highest-paid workers in Australia, with healthcare professionals who are specialists tending to earn the most.
For Australian lenders, this one statistic makes healthcare professionals attractive borrowers as they may be more likely to pay off their home loan debt. If you’re a healthcare professional, you could be eligible for a special home loan, or exclusive benefits not available to others. Some of these benefits could include lower interest rates and LMI waivers. You may want to check if lenders have offers for specific healthcare professions, such as for nurses or surgeons.
What options do I have for a home loan as a healthcare professional?
A typical home loan program for healthcare professionals may feature a combination of several benefits. Some of these benefits can depend on the documentation submitted as part of the home loan application process. For instance, some lenders may ask for proof that you’re registered with a medical professionals association. In contrast, others may ask for proof that you’re a practising professional.
One important factor lenders consider when it comes to home loans is the borrowing power of the applicant. In part, this has to do with the income of the borrower, which is why healthcare professionals are such attractive borrowers. Their much higher-than-average income levels may help to convince lenders of their borrowing power. What’s more, lenders are often willing to relax home loan terms for healthcare professionals.
Even if not all lenders offer specific home loans for health professionals, you can ask them about the following options:
- Borrow up to 100 per cent of the property’s value, no Lender’s Mortgage Insurance (LMI)
Lenders typically prefer to offer home loans that equal 80 per cent of the property value, often called 80 per cent loan-to-value ratio (LVR). An 80 per cent LVR loan requires you to pay a 20 per cent deposit, but suppose you don’t have that size deposit. Lenders may still offer you a loan but ask you to pay lenders mortgage insurance (LMI). LMI is calculated as a percentage of the loan amount and can often cost thousands of dollars. On top of the LMI costs, borrowing more could mean, you may also face higher interest rates.
Luckily, as a healthcare professional, you may find some lenders willing to lend you the full value of your property, or a 100 per cent LVR loan, without asking you to pay LMI. In many cases, such LMI waivers are unconditional, meaning you don’t have to prove that you earn a certain amount to qualify. This makes them available even to less experienced professionals and even healthcare interns.
Do some research to find a home loan that is available for your specific occupation within the healthcare industry. You’ll need to also find out if there is a ceiling on the sum you can borrow. For instance, you may want to buy a home worth $5 million, but the lender may not let you borrow more than $4 million even if you qualify for a 100 per cent LVR loan.
- Borrow up to 95 per cent of the property’s value, 5 per cent genuine savings, no LMI
If you can’t find a lender offering you a 100 per cent LVR loan, you may have the option of going for a 95 per cent LVR loan, as long as you can pay a 5 per cent deposit through "genuine savings". Genuine savings may include an amount you’ve put aside in a deposit account for the past few months, an inheritance, or a gift from your parents. Check whether the lender has any restrictions on what you can claim as genuine savings. You may still get an LMI waiver, and discounted rates if you apply for this type of a loan.
- Borrow up to 90 per cent of the property’s value, 10 per cent deposit, no LMI
A 90 per cent LVR home loan may also allow you to take advantage of an LMI waiver. You won’t need to prove genuine savings but will need to pay a 10 per cent deposit, which is still more manageable than a 20 per cent deposit. As a high-income earner from a profession with a statistically lower chance of defaulting, you may still be offered a lower interest rates.
What do lenders require from those applying for healthcare worker home loans?
There are a range of things a lender may ask a healthcare worker for when applying for a home loan, including:
- Proof of income: The amount you earn will affect the amount you can borrow. You can present your PAYG payslips as proof of income, but tax returns for at least the past year or two may also work. If you’re a general practitioner with a private practice and can submit only one year’s tax return, some lenders may accept an accountant’s statement.
- Certificate of practice or registration: If you’re claiming to be a healthcare professional, lenders will ask you to back it up by submitting proof that you’re registered with one of the many professional bodies in the healthcare industry, such as the Australian Medical Association (AMA), the Australian Medical Council (AMC), or the Medical Practitioners Board of Australia. Lenders may also accept proof that you’re affiliated to occupation-specific associations like the Australian Veterinary Association, the Australian Dental Association (ADA), and the Australasian College of Cosmetic Surgery (ACCS).
- Savings documents: You may have to show that you have the savings, or genuine savings, for the deposit. This could be your bank account statements for the past three or six months or other documents that the lender accepts as proof of genuine savings.
In addition to asking you for these documents, the lender will also ask you to authorise a request for your credit report. Lenders will use this to find out about your past experiences of borrowing and repaying loans.
Further, lenders can apply their own calculations to estimate the amount you are likely to earn during the loan term as well as your borrowing power. You may want to try estimating this for yourself, using an online borrowing power calculator, or even just through a back-of-the-envelope calculation.
How can I reduce my health professional home loan costs?
As a healthcare professional, you may have several options for reducing the costs associated with your home loan that other applicants don’t. You also need to consider that while you may qualify for a higher LVR home loan, you’re borrowing a significant sum of money which you still need to repay. You should take all possible steps to reduce the loan amount and the overall cost of the home loan as you don’t want to fall into mortgage stress.
Some options that allow healthcare professionals to save on home loan costs include:
- LMI waivers: An LMI waiver can potentially save you thousands, you can use an online LMI calculator to get an estimate of these possible savings.
- Lower interest rates: Lenders may offer you a discount of up to 1 per cent off the standard variable rate for specific healthcare industry members. You may get a higher discount if you borrow a lower amount, especially less than 80 per cent LVR.
- Government grants or deposit schemes: You can bring down your loan amount by applying for the following grants or schemes:
- Commonwealth HomeBuilder Grant: This $25,000 grant is one of the government measures aimed at responding to the Coronavirus pandemic. Those who individually earned $125,000 or less in either of the past two financial years or earned $200,000 as a couple are eligible. You can use it when building a home costing $750,000 or less, with the contract signed between June 2020 and December 2020. Check the Treasury website for full details.
- >First Home Owner Grant (FHOG): The FHOG is an older scheme explicitly meant for those buying their first home. The scheme is federally funded but managed by each state or territory, it’s best to check your local government website for eligibility criteria.
- First Home Loan Deposit Scheme (FHLDS): This scheme allows home loan applicants who can’t get a loan of more than 80 per cent LVR to lower their deposit to 5 per cent. If you qualify for this scheme, as much as 15 per cent of the loan amount is guaranteed by the state or territory government. There are additional income and other criteria you should check before applying.
- Duty concessions: Some state and territory governments offer concessions on the stamp duty or property transfer duty incurred when buying a home. Since these amounts are often added to the home’s value when applying for a loan, qualifying for concessions can bring down the amount you need to borrow.
If you can’t directly find information about suitable home loans or lenders, you may want to consider consulting a mortgage broker. A broker can help guide you through the application process whilst also offering you expert advice on the options available to you.