Dental Tribune United Kingdom Edition No.4, 2017

12 BUSINESS Dental Tribune United Kingdom Edition | 4/2017 What would Dr Mo Lar do? Part 3 Considerations when buying a home By 4dentists, UK Over the course of this 11-part series, the 4dentists group will ex- plore ways to tackle a number of personal and professional chal- lenges by providing advice and guidance to ﬁ ctional character Dr Mo Lar. In this article, the third in the series, the different options available to dentists looking to purchase property are explored. Lar has been working as an associate for several years now, which means he ﬁ nally has the capital to purchase his first home—the next step in his life plan. Currently, he is in rented accommodation, but by buying a home, Lar will get himself on the property ladder, which, in turn, will help assure ﬁ nancial secu- rity for the future. Altogether, embarking on the adventure of home ownership is very exciting, but Lar will do well to remember that it can also be extremely stressful. It is, after all, one of the greatest ﬁ nancial commitments he will ever make. As Lar will need to take out a mortgage on the property— which is the case for the majority of buyers—he will need to decide which type to choose. Seeking expert advice on the kinds of mortgages available and weigh- ing up your options beforehand can be hugely beneﬁ cial when purchasing a home. AD One of the main types that Lar should be aware of is a repay- ment mortgage, for which the borrower is required to make a monthly payment to the lender, repaying both the interest and some of the capital. There are a number of advantages to choos- ing the repayment option, in- cluding it limiting the risk linked to taking out a mortgage, it being simple to understand and follow payments, and as long as you keep up with the repayments, the mortgage being repaid by the end of the term. Potential disad- vantages are that there is no pos- sibility of additional investment returns, there is a limited chance of repaying the loan early with- out increasing the monthly pay- ments, and if you move house frequently, it is very difﬁ cult to build up equity in the property in the initial stages, as repay- ments mostly consist of interest. Another option to consider is the interest-only mortgage, for which the borrower only repays the interest on the loan each month and the amount that is owed remains the same through- out the duration of the mortgage repayments. When the mortgage term reaches its end, the bor- rower is required to pay back the principal amount. In order to do so, the borrower must make sure that he or she has saved enough money to be able to repay the loan. Again, there are a number of advantages and disadvan- tages to taking out this kind of mortgage on a property. For in- stance, it provides the opportu- nity to make a return on the in- vestment, there is the option to repay the loan early and it is easy to transfer the mortgage without disrupting the payment plan. However, the borrower’s ability to repay the loan is dependent upon the investment perfor- mance of the savings vehicle that has been chosen, so the risk is considerably higher than for a repayment mortgage. In addi- tion, there are two separate pay- ments to keep track of, one to the lender and the other to the in- vestment company, and this can be confusing and stressful. The other option available to Lar would be a mix-and-match mort- gage, which is exactly what it sounds like: you choose a combi- nation of mortgage types to spread the risk. Whatever type Lar chooses, it is crucial that he take into con- sideration exactly how much he can afford, both now and in the future. If he is looking to be- come a practice principal or start a practice group, for in- stance, this might affect his ﬁ - nances and how much he can pay. Lar would also need to think about how his plans to start a family would affect his mort- gage affordability. factor Another that Lar would need to give thought to is how being an associate will af- fect his securing a mortgage. When dealing with self-em- ployed dentists, most lenders will request a minimum of two years’ accounts because the af- fordability assessment is based on net pre-tax proﬁ t and not turnover. As such, accurate re- cord-keeping is essential, and it is for that reason that it can pay to utilise the services of a spe- cialist accountant. For the actual acquisition process, it is essential that the buyer employ either a solicitor or a licensed conveyancer to deal with the legal aspects of the transaction. There are a number of different options available from Internet-based companies to traditional high-street or larger commercial ﬁ rms, and costs can vary signiﬁ cantly from one to the other. Ultimately, buying a house is one of the most expensive purchases that Lar will ever make, so it is impor- tant that he choose the right team to represent him in his purchase. Further to that, it can pay to use a company like the 4dentists group that offers ac- countancy, legal and ﬁ nancial services all under one roof. Lar is making a huge com- mitment buying his ﬁ rst home, but with concise and well-in- formed professional advice, he can achieve his goal in a rela- tively stress-free and uncompli- cated way. Next issue: How Lar can legally reduce his tax bill.

Dental Tribune United Kingdom Edition No.4, 2017

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