What you should know about home loans for lawyers

What you should know about home loans for lawyers

Many Aussie lawyers and legal professionals earn considerably more than the average Aussie employee. As a result, they may find it easier to apply for a home loan, as lenders feel confident about their ability to repay. Further, as a legal professional, you may qualify for a variety of discounts depending on your exact occupation and family circumstances. For instance, among legal professionals, judges or magistrates usually earn higher salaries than lawyers or barristers, which makes them better candidates for home loan discounts.

How do I qualify for special deals on mortgages for lawyers?

When reviewing your home loan application, lenders assess your income to find out if you can afford to pay back the loan. They will weigh up the cost of mortgage repayments along with your other living costs and debt repayments. If you work in the legal industry, whether in government service or private practice, you’re likely to be a high-wage earner. This gives lenders a degree of confidence about your ability to repay the loan, and they may be willing to offer you special deals as a result. Apart from home loans, you may also be able to access other special offers on other products necessary for your work as a lawyer. 

Lenders may have an order of preference when offering deals and have an income threshold required to access certain deals. For instance, if you’re a solicitor or a barrister, you may find it easier to qualify for a home loan discount than a paralegal or a new lawyer with little experience. From the lender’s perspective, a solicitor or barrister probably earns more than a paralegal or a new lawyer who may not be eligible to practice yet. You can speak to a mortgage broker to discuss your circumstances and see what deals are on offer for you.

What kinds of home loan discounts are available to different legal professionals?

As a solicitor or a barrister, you may be eligible for lower interest rates or a Lenders Mortgage Insurance (LMI) waiver. You may also get other favourable terms when purchasing a new home or refinancing an old home loan.  Lenders may ease the borrowing criteria for you if you’re buying property as an investment and may even offer you more flexible credit limits than those given to other borrowers. You also have the option to take the home loan in the name of your law firm or a trust, and not necessarily in your name. 

To qualify for the LMI waiver, you may need to earn more than $120,000 in some states and more than $150,000 in others. Suppose you are buying a home costing $1.2 million in NSW. Lenders typically ask you to pay for LMI if you borrow more than 80 per cent of your home’s value, which in this case would be $960,000 or more. However, if you’re a barrister or a solicitor licensed to practice in NSW lenders may waive LMI. You will need to earn more than $150,000 annually and submit a copy of your practising certificate. Some lenders may also accept proof of membership of legal industry associations, instead of the practising certificate. Speaking to a mortgage broker will help you understand what offers are available to you.

These discounts may also be available to judges and magistrates who can prove that they are not eligible to practice - and thus don’t have a practising certificate. These discounts usually aren’t available to legal professionals outside judges, magistrates, barristers, and solicitors, because they typically earn less. Some lenders may make an exception if you’re married to another legal professional who is eligible and your combined income is upwards of $150,000 annually. If you receive any rental income, check with the lender if they’ll accept that as part of your total income when considering your eligibility.

How can other legal professionals qualify for home loan discounts?

The fact that more home loan discounts are available to some members of the legal industry doesn’t mean that newcomers to the legal profession can’t find suitable deals. If you’re chosen to work for the government as a barrister or solicitor, you may not meet lenders’ income criteria.  You could check if there are lenders who offer a different minimum income requirement so you can access discounts or other benefits.

You can still access lower interest rates if you don’t meet the minimum income threshold with a sufficiently high credit rating. You will need enough savings for a deposit that covers 20% of your home’s value to avoid paying for LMI. It may be useful to consult a mortgage broker before approaching a lender as they can help you review all your options and make sure you’ve found the right deal for you. 

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Learn more about home loans

What is a redraw fee?

Redraw fees are charged by your lender when you want to take money you have already paid into your mortgage back out. Typically, banks will only allow you to take money out of your loan if you have a redraw facility attached to your loan, and the money you are taking out is part of any additional repayments you’ve made. The average redraw fee is around $19 however there are plenty of lenders who include a number of fee-free redraws a year. Tip: Negative-gearers beware – any money redrawn is often treated as new borrowing for tax purposes, so there may be limits on how you can use it if you want to maximise your tax deduction.

How personalised is my rating?

Real Time Ratings produces instant scores for loan products and updates them based what you tell us about what you’re looking for in a loan. In that sense, we believe the ratings are as close as you get to personalised; the more you tell us, the more we customise to ratings to your needs. Some borrowers value flexibility, while others want the lowest cost loan. Your preferences will be reflected in the rating. 

We also take a shorter term, more realistic view of how long borrowers hold onto their loan, which gives you a better idea about the true borrowing costs. We take your loan details and calculate how much each of the relevent loans would cost you on average each month over the next five years. We assess the overall flexibility of each loan and give you an easy indication of which ones are likely to adjust to your needs over time. 

How often is your data updated?

We work closely with lenders to get updates as quick as possible, with updates made the same day wherever possible.

Do other comparison sites offer the same service?

Real Time RatingsTM is the only online system that ranks the home loan market based on your personal borrowing preferences. Until now, home loans have been rated based on outdated data. Our system is unique because it reacts to changes as soon as we update our database.

Why should you trust Real Time Ratings?

Real Time Ratings™ was conceived by a team of data experts who have been analysing trends and behaviour in the home loan market for more than a decade. It was designed purely to meet the evolving needs of home loan customers who wish to merge low cost with flexible features quickly. We believe it fills a glaring gap in the market by frequently re-rating loan products based on the changes lenders make daily.

Real Time Ratings™ is a new idea and will change over time to match the frequently-evolving demands of the market. Some things won’t change though – it will always rate all relevent products in our database and will not be influenced by advertising.

If you have any feedback about Real Time Ratings™, please get in touch.

What is an ombudsman?

An complaints officer – previously referred to as an ombudsman -looks at formal complaints from customers about their credit providers, and helps to find a fair and independent solution to these problems.

These services are handled by the Australian Financial Complaints Authority, a non-profit government organisation that addresses and resolves financial disputes between customers and financial service providers.

How common are low-deposit home loans?

Low-deposit home loans aren’t as common as they once were, because they’re regarded as relatively risky and the banking regulator (APRA) is trying to reduce risk from the mortgage market.

However, if you do your research, you’ll find there is still a fairly wide selection of banks, credit unions and non-bank lenders that offers low-deposit home loans.

What is the flexibility score?

Today’s home loans often try to lure borrowers with a range of flexible features, including offset accounts, redraw facilities, repayment frequency options, repayment holidays, split loan options and portability. Real Time Ratings™ weights each of these features based on popularity and gives loans a ‘flexibility score’ based on how much they cater to borrowers’ needs over time. The aim is to give a higher score to loans which give borrowers more features and options.

What does going guarantor' mean?

Going guarantor means a person offers up the equity in their home as security for your loan. This is a serious commitment which can have major repercussions if the person is not able to make their repayments and defaults on their loan. In this scenario, the bank will legally be able to the guarantor until the debt is settled.

Not everyone can be a guarantor. Lenders will generally only allow immediate family members to act as a guarantor but this can sometimes be stretched to include extended family depending on the circumstances.

What is a specialist lender?

Specialist lenders, also known as non-conforming lenders, are lenders that offer mortgages to ‘non-vanilla’ borrowers who struggle to get finance at mainstream banks.

That includes people with bad credit, as well as borrowers who are self-employed, in casual employment or are new to Australia.

Specialist lenders take a much more flexible approach to assessing mortgage applications than mainstream banks.

How can I get a home loan with no deposit?

Following the Global Financial Crisis, no-deposit loans, as they once used to be known, have largely been removed from the market. Now, if you wish to enter the market with no deposit, you will require a property of your own to secure a loan against or the assistance of a guarantor.

How is the flexibility score calculated?

Points are awarded for different features. More important features get more points. The points are then added up and indexed into a score from 0 to 5.

What is the amortisation period?

Popularly known as the loan term, the amortisation period is the time over which the borrower must pay back both the loan’s principal and interest. It is usually determined during the application approval process.

What happens to your mortgage when you die?

There is no hard and fast answer to what will happen to your mortgage when you die as it is largely dependent on what you have set out in your mortgage agreement, your will (if you have one), other assets you may have and if you have insurance. If you have co-signed the mortgage with another person that person will become responsible for the remaining debt when you die.

If the mortgage is in your name only the house will be sold by the bank to cover the remaining debt and your nominated air will receive the remaining sum if there is a difference. If there is a turn in the market and the sale of your house won’t cover the remaining debt the case may go to court and the difference may have to be covered by the sale of other assets.  

If you have a life insurance policy your family may be able to use some of the lump sum payment from this to pay down the remaining mortgage debt. Alternatively, your lender may provide some form of mortgage protection that could assist your family in making repayments following your passing.