Essential Finance Tips Barristers Should Know

As a barrister, your financing requirements are unique, and you may encounter some challenges when it comes to borrowing money.

For self-employed practitioners, income often varies and can be irregular month to month. This complexity can pose challenges when borrowing money as lenders typically favour predictable and steady income streams when assessing applications, regardless of your tax bracket. Securing a loan can be challenging due to the stricter criteria imposed on such self-employed applicants from lenders.

The following is a summary of key information and tips for barristers to keep in mind when seeking finance.

Key factors to consider

• Servicing policy: As a self-employed professional, most lenders will require two years of tax returns when assessing you for a loan. However, some lenders are more flexible, accepting just 12 months of financials, including drafts from the most recent financial year.
• Increase in income: If your income has increased in the current financial year, many lenders may still base your borrowing capacity on previous years’ tax returns. However, there are lenders who are willing to consider the increased income in the current financial year on an exception basis.
• Tax debts: Major and second-tier lenders typically do not accept applications with outstanding tax debt or may impose harsh repayments against the tax debt in their calculations, which can significantly impact your borrowing power.
• Barrister specific policies: Consider choosing a lender with a credit policy specifically tailored for barristers. Policies vary from lender to lender, so it’s important to work with one that understands the unique aspects of your profession and income.

Types of lending facilities and what they mean for you as a barrister

Home loans: A home loan is a loan secured by a mortgage over property for owner-occupied purposes. Home loans typically involve principal & interest repayments.

Whilst banks typically require a 20% deposit for borrowers to avoid Lender’s Mortgage Insurance (LMI), barristers can access lower deposit options with some lenders without paying this fee.

Barristers in most cases require a deposit of only 10% of property value and are not required to pay LMI. This is because barristers are essential to society and therefore typically have a high level of job security. As a result, lenders are more willing to offer certain home loan benefits.

For example, buying a median-priced home in Brisbane for $925,000 with a 10% deposit would typically incur an LMI fee of over $20,000. Purchasing without this limitation is a significant benefit, and applies to both owner-occupied and investment properties.

Investment Loans: An investment loan is a loan secured by a mortgage over property for investment purposes. Investment loans are typically eligible for interest only repayments for tax purposes. As with home loans, barristers are required a deposit of at least 10% of property value with waived LMI. It may also be possible to use equity in existing properties to borrow 100% of property value.

Overdraft: An overdraft refers to 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 requirements. Repayments usually include principal & interest and can be structured to time periods suited for you.

Chambers Loans: Chambers finance is a loan secured by a General Security Agreement (GSA) over shares in chambers. Some banks will lend up to a 100% of the chambers’ value. This is a total unsecured facility, not tied to any assets. Chambers loans can also be secured against residential property if available, which can result in lower repayments and interest rates, greater borrowing capacity and longer loan terms. Repayments may be structured as interest only or principal & interest.

How do I get started?

As a barrister, your financing needs are bespoke, complex in nature and differ to that of the average borrower. Whether it is to coordinate residential or investment home loans, restructure debts or organise loans for chambers, it’s important to have the right experts by your side.

As Australia’s only mortgage broking service exclusively for lawyers and barristers, Legal Home Loans understand your profession and know how to leverage your elite standing with lenders like no other. With access to over thirty lenders, we can help you find a solution that best suits your unique situation. We’ll coordinate your application from start to finish with a dedicated specialist with you every step of the way.

Plus, as a member of the Bar Association of Queensland, you’ll receive a $500 cashback at loan settlement, thanks to the Partner Benefits program.*

Get in touch with Legal Home Loans today for more information.enquiries@legalhomeloans.com.au(02) 9030 0420

*Disclaimer: Rebate applies to the member’s first loan settled with Legal Home Loans. Legal Home Loans will honour the highest valued rebate applicable to the client. Limit of one rebate per loan in the case of multiple qualifying applicants. Loan value must exceed $250,000 to be eligible. Eligibility will depend on your unique situation. To find out what is possible for your needs, please contact us and speak to our specialists for a tailored solution. This page provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances.