We talk all about mortgages for teachers with Lee and Neezam.
Podcast approved by The Openwork Partnership on 12/06/2023.
Are there specific mortgages tailored to teachers?
There aren’t any snazzy mortgage products specifically designed for teachers, but some banks and lenders look at teachers more favourably. This goes for a lot of professions, including teachers.
When assessing things like affordability and how much you can borrow, some specific banks offer more to teachers. On the other hand, lenders may view teachers in a different light if they are on a fixed term contract, they are a supply teacher or they work part time.
You may be paid overtime or unsociable hours, you may be a lecturer…there’s lots of different dynamics for a teacher. Whatever your situation, we can help.
Is it easier to get a mortgage as a teacher?
It depends on the lender – some will look more favourably on affordability and the security of your job. Lenders always want to know of any changes that might impact you during the mortgage term that will stop you from being able to repay the mortgage.
As a teacher, you’re pretty much in demand across the country. Even if you move or lose your job – unless it’s through ill health or something – you’re very likely to find a new job quite quickly.
But with most lenders it’s probably going to feel very similar, whether you’re a teacher or not.
Are there any differences when it comes to teachers buying their first home, looking to remortgage or looking into Buy to Let properties?
In terms of applying there probably isn’t a great deal of difference. Some lenders are more favourable to teachers and some aren’t – there’s some simplicity from that.
What it really comes down to is that as a First Time Buyer you have no experience in buying a house, which can make it seem more complicated.
As a teacher you can be looked at in different lights in terms of your income and your contract. If you’re a supply teacher, for example, or a newly qualified teacher, that can be more complicated than with a full time teacher.
The process you take is very similar, but it’s you as an applicant that can differ – due to your past experience with mortgages and your personal circumstances.
How much can teachers borrow for a mortgage?
Again, it depends on affordability. Lenders will assess your income through your last three pay slips. Then they’ll apply their own affordability calculations, which are specific to each lender, to decide what they will comfortably lend to you.
They’ll factor in things like credit commitments, your deposit and whether you have any financially dependent children. They also look at credit scoring, to see if you have missed any payments in the past, and how long the mortgage will be.
Ultimately, it all comes down to that lender’s risk appetite. They also want to make sure that if the cost of living continues to go up and if interest rates go up again, you can still afford the mortgage. They apply a ‘stress test’ which basically checks that if rates were 2% higher, you could still afford your repayments.
You’ll potentially get a different figure from every lender. And there’s no single lender that will lend more to anyone in particular. It depends on your situation, plus lenders change their criteria throughout the year.
So in terms of how much you can borrow, it’s a difficult one to answer. A lot of people will tell you it’s four times or 4.5 times your salary, but it’s not always that straightforward. The only way to find out for sure is to go through that affordability calculation with an advisor.
What help and schemes are there for teachers?
You’ve got all your normal schemes like Shared Ownership and the Deposit Unlock scheme offering a 5% deposit for a new build.
The only scheme that stands out specifically to teachers is a fairly new scheme called First Homes. This prioritises key workers including teachers. It’s effectively a discount on the property you’re buying – of anything between 30% and 50%, which is a huge saving.
It isn’t available all over the UK – it’s only on selected developments, so that’s something to look out for if you’re considering a new build property. It comes with some caveats that I won’t delve into now.
Also, some developers offer specific discounts and contributions towards deposits when buying a new build home. I’ve worked on one very recently that offered a 5% deposit contribution towards a teacher’s home. So there are lots of things out there.
Something to point out here is that you won’t find better rates as such for teachers. That’s a common misconception. However, there are some professional products where lenders may offer you five times or 5.5 times your income, which is something to consider as well.
What mortgage protection products are available for teachers?
Anyone taking on a mortgage debt and liability needs to protect themselves from that debt. It means that if you’re buying a home you can always keep it, even if your circumstances change.
If you have a joint mortgage and either one of you died, the other one could keep the home. The mortgage is based on two incomes rather than one, so a life insurance policy will pay out to clear the mortgage debt so you can keep the home.
A second important product is critical illness cover. Rather than pass away during your mortgage term, you’re actually more likely to suffer a critical illness such as cancer. One in two people in the UK is now diagnosed with cancer in their lifetime.
We always review this with our clients to make sure that if anything does happen to you that you’re financially protected. You’ve got plans in place and you’re financially resilient. You can carry on paying your mortgage and cover essential outgoings things like food, council tax, utilities. A critical illness policy would pay out in the event of a diagnosis of cancer, stroke or Multiple Sclerosis – anything along those lines.
The third one is income protection. Most teachers, like a lot of public sector workers, will hopefully have good sick pay and benefits from their employer. But if you can’t work due to an accident or an illness and can’t work for several months, would your income stay the same or does it go down? When does it actually go to statutory sick pay?
SSP is currently around about £100 a week maximum. An income protection policy would kick in when needed, to guarantee a certain amount of income until you’re well enough to return to work.
The conversation about protection is something we always recommend when you’re taking a mortgage out. It’s a minefield – the policies are all different, with specific benefits and levels of cover. So it’s not always a case of who’s offering you the best deal. It’s a tricky one to navigate.
As a teacher, if you’ve got plans in place already we can review them and make sure they are still fit for purpose. There may be no need to take any additional products.
How can a mortgage broker help with teacher mortgages?
As a teacher you’re in a stable job and a respected role. You’re highly employable and a low risk to a lender. So with a mortgage, it’s just a case of making sure you’re getting the right deal for you and understanding how much you can borrow.
Some buy to let mortgages are not regulated by the Financial Conduct Authority.
Approved by The Openwork Partnership on 12/06/2023.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS