Life as a lawyer often entails a high-stress environment and long working hours. However, lawyers can generally expect to earn a good salary in return. Generally, we assume a high salary makes it easier to get a mortgage on your dream property. Unfortunately, lawyers are a prime example of high-earning professionals who struggle to secure mortgages on the high street—and the higher up the ranks you go, the more complicated it becomes. So, how can a lawyer get a mortgage?
Income isn’t such an issue at the lower end; solicitors and newly qualified barristers employed on a PAYE salary should encounter relatively few problems. However, once you are experienced enough to go self-employed, or are made partner in a firm, the situation becomes more complicated.
An equity partner will often have ‘points’ in a firm, which is akin to having shares. They will then be able to draw their share of company profits, which typically works out at more than a base salary. Equity partners are therefore classed as self-employed.
When a client is self-employed, lenders will generally look to see 2-3 years’ worth of accountants’ records and will take an average of these figures. If you are a lawyer who has only recently turned self-employed, you may therefore struggle to secure a mortgage with high street lenders despite your stellar employment record, as you won’t have two years of records.
If you are working for a global firm, this can be complicated further. Equity partners in global firms will typically take some of their income in foreign currency, and may even pay tax in foreign currency, as this can be more tax efficient. Most high-street lenders will not take foreign currency into account when calculating affordability.
Many lawyers I have worked with earn very strong salaries—between the region of £200-£600,000 a year—so it’s very unfortunate that the attitude of high street banks means professionals with incomes like this are unable to secure the mortgages they require. The way around this is to use a broker who has good relationships with private and specialist lenders; such relationships give brokers the negotiating power to explain your situation to the lender.
For example, I recently worked with a client who wanted to raise £1.3million on their £2million property in Central London. My client was an equity partner in a global law firm, and he wanted to refinance his property to raise money for extensive home improvements. His position as an equity partner posed two problems; he received part of his income in dollars, and he had only been an equity partner for one year so the average of his last two years’ salary did not support the level of borrowing required.
Fortunately, I was able to arrange a mortgage at a rate of 1.28%, from a lender who could take his foreign income into account, and also use a projection of his future earnings to calculate his affordability.
As such, despite the problems faced by lawyers in securing a mortgage, it is possible to achieve excellent results with the use of a good broker who knows which broker to approach.