Dental Tribune United Kingdom Edition

November 14-20, 201126 Money Matters United Kingdom Edition A brief survey of five of the UK’s best known high street banks reveals that self-em- ployed dentists who qualified in the last three years are likely to be refused a mortgage High Street mortgage trap for young dentists T he fundamental prob- lem we discovered is that these bank’s mortage application criteria demands at least two years ac- counts and in some cases three years’ accounts. It appears that high street banks don’t appreci- ate that dentistry can be a finan- cially rewarding career. Unfor- tunately most banks operate a rigid mortgage application pro- cess often resulting in rejection part way through. Once your application has been submitted, or if you have applied for a ‘decision in prin- ciple,’ a credit check will often be performed. If you are later rejected because of a lack of accounts the credit check will remain on your record for other lenders to view. A solution… Persuading a high street bank to change their lending criteria is a non-starter. The most effective way round this problem is to start with a lender who is sympathetic to your cause. Thankfully there are several lenders who appre- ciate the unique career path of a dentist and will accept this as a valid reason for your lack of ac- counting history. However, only a handful of lenders offer this flex- ible approach. A dental specific independent financial adviser will be able to select these ‘flex- ible lenders’. In many cases we will have a hotline to the mortgage under- writer to enable an application to be sent with a pre-agreed ‘stamp’ of approval. This pre-agreement is vital to ensure the application can progress. Often we will aim to back your application with a letter from the practice princi- pal confirming your anticipated income. There may also be a requirement to produce a letter from an accountant confirming your anticipated profits. What can I borrow? Broadly speaking a self-em- ployed dentist will be able to bor- row up to 4.5x joint incomes or 4x your single income. However the deposit required usually re- stricts the mortgage to less than this. You should work on provid- ing at least a 10 per cent deposit. Make sure you have consid- ered the other things that will af- fect your application such as your credit profile and other financial commitments. For example tak- ing out a large car loan prior to applying for a mortgage is likely to limit your ability to borrow. Make sure you are on the elec- toral role and have the ability to produce bank statements show- ing your regular income and financial commitments. Whilst student loans may be taken into account, from experience you won’t be penalised for having one. So in summary approach the high street mortgage lenders with caution and seek specialist advice where possible. DT About the author Jon Drysdale is a director and in- dependent financial adviser with Practice Financial Management Ltd (PFM). PFM present a financial plan- ning and ‘business of dentistry’ ses- sions for a number of Foundation dental courses across the UK. PFM offer financial advice exclusively for dentists and also offer a dental ac- countancy service: www.pfmdental. co.uk and www.pfmtownends.co.uk