Home loans for teachers

Teachers play a significant role in shaping the world, one student at a time. It’s no wonder, teaching is considered a rewarding profession in many ways. Besides mental satisfaction, stable income, and the love and respect of society, teachers can also receive special treatment from lenders due to the stable nature of their income. Even during the pandemic, teaching has remained a coveted profession. This makes it a suitable time for you to take out a home loan and purchase the home you’ve been dreaming of.

If you’re working as a permanent teacher, you can apply for a standard home loan from any lender. Some lenders also offer special home loans for teachers where you can borrow 85 per cent of the property price without LMI. To access this, you will need to have a good credit history and long-term employment. However, things can be a little difficult if you’re applying as a teacher in a casual position.

When you’re just starting out as a teacher, working as a supply or casual is the norm. Some teachers also make a choice to work as a casual teacher indefinitely. Typically, teachers work for about 40 weeks a year. During the long summer break, there is usually no income for those working as casuals. For most lenders, such inconsistent income over a year is difficult to assess. Which means they won’t approve your mortgage if you’re not part of the permanent teaching staff.

Luckily, there are a few lenders that provide home loans to teachers working as casuals. These lenders assess your application by calculating your gross year-to-date income which they use to determine your average fortnightly salary. Teachers Mutual Bank is one such specialised financial institution that offers tailored financial products, including home loan assistance, to teachers in Australia. You can also speak with a mortgage broker to find out which lenders offer an LMI waiver to teachers.

Deciding to purchase a home is perhaps the easiest part of the home buying journey. It’s what follows that requires real patience and diligence, especially finding a home loan to finance your purchase. It’s always better to put some additional effort into selecting the right home loan now, which can help you plan your finances and future better. Here are a few things you can start doing right away to help you get a competitive deal for financing your home.

Shop around

All home loans are different, and what works for your parents or friends may not be suitable for you. That’s why it’s vital to shop around for home loans, so you know what’s on offer and pick one that’s right for you. Luckily, you no longer need to visit lenders themselves or even step out of your home to start your home loan search. You can begin comparing home loans online from the comfort of your computer, tablet or even smartphone and start narrowing down your options based on what you need.

When comparing home loans, we recommend that you consider the comparison rate. This rate gives you a more accurate picture of what the loan is going to cost over its full term. Lenders work out the comparison rate by combining the loan’s interest rate with other costs and fees and express it in the form of a percentage. This makes it easier to compare the true cost of one loan against the other. 

Crunch the numbers

Before you apply for a home loan, figure out how much you can borrow by calculating your borrowing capacity. Borrowing capacity is a term used by lenders to describe how much money you might be able to borrow, depending on your financial situation. Some of the factors that affect your borrowing power include your income, your existing debts, active credit cards and the amount you have saved up for a deposit. You can use an online borrowing capacity calculator to get a rough estimate of how much lenders may be willing to let you borrow. 

Once you determine the approximate amount you can borrow, head to a repayment calculator to crunch the numbers on the home loan repayments. These calculations will give you an idea of your monthly repayments to determine the right-sized loan for you.  It’s also smart to use a higher interest rate, one to three per cent higher, than what’s advertised for your calculations. This will allow you to include a financial cushion that protects you against any future interest rate rises.

Educate Yourself

You can seek professional help from a mortgage broker to find a suitable home loan for your circumstances. Whether you’re working with a mortgage broker or direct with lenders, it’s good to educate yourself about home loan basics. This includes common industry jargon and essential home loan features which will help you navigate the market with confidence. Understanding the various features that could be available with your home loan will make it easier for you to meet your monthly repayments and cater for emergencies. It will also save you money in the longer term.

You can head to our blogwebsite to learn more about home loans or connect with a mortgage broker to find out the offers that you might be eligible for.

A lender will usually let you borrow up to 80 per cent of the property’s value if you have a good credit score and your mortgage application is in order. However, if you’re looking to borrow more than 80 per cent, you’ll need to pay LMI or ask a family member to go guarantor for your home loan. 

If you are applying for a home loan as a teacher, some of the other options available include: 

• Borrow up to 85 per cent of the property’s value with an LMI waiver from specific lenders. A clean credit file and regular teaching income will help your chances of getting approved under these circumstances also.
• Borrow up to 100 per cent of the property’s value with a guarantor. 
• Get access to discounted, special home loans for teachers on a case-to-case basis.

 To be eligible for special home loans for teachers, you must:

• Have at least one year of continuous employment or a minimum of two years of teaching experience.
• Maintain a high credit score. 
• Have 5 per cent of the purchase price in genuine savings as shown by the past three months of your bank statements.
• Save an adequate deposit to cover at least 15 per cent of the purchase price and additional upfront costs like stamp duty. You can also apply for the First Home Owners’ Grant (FHOG) in your state or territory to help boost your deposit amount. Visit your state or territory’s website or connect with a mortgage broker for more information on the FHOG.

When applying for a home loan for school teachers, you need to provide all the standard home loan documentation like identification details, proof of income and employment, expenses, etc. 

If you’re working as a casual, some lenders will ask for additional documents to calculate your gross year to date (YTD) income. They then use this to determine your average fortnightly salary. You should be able to provide payslips showing consistent income for at least three months. Which means they expect you to be working in your casual position for at least three months before applying for a mortgage.

Your lender may also ask for a letter of employment to ascertain your employment status. Lenders are specifically interested in the future of your job status. They would like to see if you have a teaching block confirmed for the subsequent term. If you’re likely to be made a full-time teacher soon, an employment letter indicating this fact will strengthen your mortgage application further.  

It’s common practice for teachers, especially those employed on a casual basis, to work a second job to supplement their income. These teachers usually work as tutors on a contract or freelance basis with other public schools, private education providers, or directly with families.

If you work a second job, some lenders may include your additional income when assessing your application if you meet the following criteria:

• Your second job is in the same line of work, teaching, as your primary role this could include tutoring in various subjects.
• You’ve been working in the second role for more than six months and earning a regular income from it.
• If you’re self-employed and have been working for at least two years and can provide your tax returns and an accountant’s letter to verify your supplementary income.

There are no specific home loan grants for teachers but, as a first home buyer, you may be eligible for First Home Owners’ Grant. Check if you meet the eligibility criteria on your state or territory’s website.

Your eligibility for the grant depends on what state or territory you want to buy in, the amount you’re going to spend, and whether you’re buying a residential or investment property.

Essential eligibility criteria for the FHOG requires you to:

• Be aged 18 years or above.
• Be a permanent resident or citizen of Australia.
• Not have previously owned a home in Australia.
• Live in the property as your primary residence for at least six months.

You may visit your state or territory’s website for the most updated information on FHOG or seek help from a mortgage broker to check your eligibility for the grant.

No, you don’t need a mortgage broker to get a home loan as a teacher. You can always shop around and compare home loans on your own to find the right loan for your circumstances. However, remember you want to find a lender that understands your employment conditions, especially if you’re working as a casual, and secure a competitive home loan deal. Not all lenders accept secondary or overtime income as part of your assessable income for a home loan. Therefore, you need to go with a lender that accepts your extra income for assessing your application because it can increase your borrowing capacity significantly. 

Mortgage brokers work with several lenders and are aware of the eligibility requirements of these lenders. They sometimes also have access to special deals and discounts only available to them, which they may pass on to their customers. If you decide to work with a mortgage broker, you’ll benefit from expert financial advice. This knowledge and advice will save you considerable time wading through the hundreds of home loan options. A broker will not only suggest home loan deals tailored to your circumstances but will also walk you through the entire application process. 

Whether you choose to work with a mortgage broker or go solo when finding a home loan is entirely your choice. In either case, you can kickstart your home loan journey by comparing home loan deals from multiple lenders online.