How does being a self-employed dentist impact you getting a mortgage?
Richard Lishman, managing director of the 4dentists Group, explains.
Being a self-employed dentist does not restrict the lenders or products available to you, but does impact how a lender will assess your earnings. Given that the majority of dentists are self-employed, it is important that your earnings are presented in the best possible light to a lender.
Most dentists operate through either limited company or are a sole trader operating alone or within a partnership. We often find many of our clients can switch from one operating model to another during their career and each time this happens it can impact how a lender will assess you.
How are your earnings assessed?
Most lenders will want to see a two-year trading history, so either two years of limited company accounts or two years of tax returns. However, there are some high street lenders that will look at your latest year’s figures and, if you are newly self-employed, look at your first year of earnings.
There are also scenarios when a dentist moves from a sole trader to a limited company or vice versa. In this scenario there are lenders that will be satisfied after 12-months of trading in the new format.
Do you need to speak to a specialist?
It makes sense to speak to a whole-of-market adviser that is not tied to a particular lender or restricted to a small number of lenders. This should ensure that the adviser will find you the best possible deal. An adviser may also have access to deals that are not directly available to the public.
It is also important that you speak to somebody who has a deep understanding of self-employed dentists and can correctly interpret earnings in a tax return/limited company accounts. The person you receive advice from needs to knows which lenders can work in unusual circumstances such as newly self-employed, change in self employment type or wanting to use your latest year earnings.
We have seen within the dental community that during the pandemic many mortgage advisers aren’t successful in arranging funding. This can be for a number of reasons, including not having access to all lenders so their offering is restricted; or they do not have sufficient expertise within dentistry and the mortgage market.
Is now a good time to remortgage or make a purchase?
At the moment, the interest rates high street lenders are offering are at historically low levels so now is a good time to borrow money providing you can afford the repayments. It is almost certainly a good time to review your mortgage if you are on a high variable rate. Market leading rates are as low as 1.14 per cent for a two-year fix at 60 per cent loan to value for a residential remortgage.
The mortgage market is extremely competitive at the moment which means remortgaging can be very cost efficient with lenders offering free valuations, free legal work and often fee free products.
In terms of making a purchase, this needs to be a personal decision based on your own circumstances. Because of the low cost of borrowing, owning your own property is highly likely to deliver a saving versus renting. You also need to take into account what you believe might happen to house prices in the future and also your age. Most mortgages need to be repaid before you retire so it is important not to leave it too late.