As a barrister, your financing requirements are unique. Often, lenders or brokers don’t understand the unique remuneration structure of a barrister – and this can lead to you losing out.
Read on to find out important tips and information to know before you take out a home, commercial or chambers loan.
What do you need to consider?
When seeking any form of finance as a barrister-at-law, it is pertinent to consider the following:
- Increase in income: If you’ve had an uptick in income in the current financial year, lenders may disregard this and use your previous years’ tax returns or an average to calculate borrowing capacity.
Recommendation: Be sure to use a lender that will count your most recent financial year’s income to maximise borrowing power.
- Tax debts: Will not be accepted by most major and 2nd-tier lenders. This could reduce your borrowing power or inhibit it completely, depending on the lender and your level of debt.
Recommendation: If you’re looking to borrow for a home loan, tax debts must be repaid or moved into another facility.
- Comprehensive credit reporting: As of 2020, all missed repayments are reported to credit bodies and therefore will be visible to lenders when assessing your application.
Recommendation: It’s important that all bills are paid on time.
- Barrister specific policies: Apply to a lender with a credit policy specific to barristers. Private banks are not always best as they can be more expensive and may not have legal professional credit policies.
Recommendation: This can be difficult to navigate and is best outsourced to a specialist broker such as Legal Home Loans to protect your interests.
Types of loans and what they mean for you as a barrister:
- Home Loans
A loan secured by a first mortgage over a property. Home Loans typically involve interest and principal repayments. Generally, as a barrister you could be eligible to purchase with a deposit of 10% of property value plus stamp duty, as you may be exempt from paying Lender’s Mortgage Insurance.
- Investment Loan
Also secured by a first mortgage, investment loans may be set up as interest only repayments for tax purposes. As per residential home loans, you could be eligible to purchase with a deposit of 10% of property value plus stamp duty, as you may be exempt from paying Lender’s Mortgage Insurance. It may be possible to use equity in any existing properties you own to borrow 100% of property value plus costs.
A credit facility linked to a business transaction account, allowing you to draw your account into arrears to a set limit. Overdrafts are useful for covering short-term cash flow. Repayments are generally Interest + Principal but can be structured to time periods suitable for you.
- Working capital facility
A loan to help finance everyday operations, such as payroll or rent. A working capital facility is a revolving line of credit that is usually low-cost, easy to obtain and particularly useful during periods of business inactivity. Can be set over a fixed term with Interest only repayments.
- Chambers Finance
Relevant to certain Australian states and territories, this is a loan secured by a General Security Agreement (GSA) over shares in chambers. Banks will typically lend 50-60% of chambers’ value. Can be set to interest only and repaid over a fixed term. Chambers can be secured against your residential property if available, which results in lower repayments and rates, greater borrowing capacity and an increased loan term.
- Asset Finance
Loan secured by the vehicle being purchased in the form of a chattel mortgage. Set over a fixed term, typically 3-5 years, with options to repay down to zero or up to a 35% residual balloon. At Legal Home Loans, we also offer complimentary car sourcing to our esteemed clients to make your new drive a breeze from start to finish.
As Australia’s only finance broking service for legal professionals, we understand your needs and how to leverage your elite standing with lenders like no other.
Have a question or want to get started on your next loan? Ask us today.