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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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This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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