Dr. James, 9s:

sup everyone. How's it going? Another podcast with returning face, sarah grace. Big up and borrowing, sarah, that's what we're here to talk about today. You know what? Before we jumped on the air just now, we were brainstorming. We were brainstorming titles for this podcast and I was, I was, I had all these. I was coming up with all these boring names and then sarah jumped in with big up and borrowing and I was like we've got to roll with that. So hats off to Sarah.

Sarah, 33s:

Sarah, how are you Brilliant, yeah.

Dr. James, 39s:

How are you? Is life treating you well?

Sarah, 41s:

Yeah, great great, really, the sun's shining. You know people are moving, they're buying their houses spring and you, you know moving in the summer, in the kids' holidays, and so yeah.

Dr. James, 58s:

Oh, is that how it works? Does the market pick up?

Sarah, 1m 0s:

Yeah, a lot of people want to move in the children's holidays, you know, ready for the new term in September. So it's quite an active few months, uh, and then and then it sort of perhaps goes a little bit quieter over the summer months when everybody's on holiday and does that apply to the dentists as well?

Dr. James, 1m 24s:

it's that theme is concurrent in the dental sector too. Well, I suppose you service mainly dent dentist, so that goes without saying yeah, yeah, yeah, yeah, yeah, okay, cool, fair enough.

Sarah, 1m 36s:

Easter's normally quite quiet on the phones with new inquiries because everybody's on holiday over easter gotcha, okay, cool, and then the sun shines.

Dr. James, 1m 46s:

People get excited and they get, they get. They get carried away with their dreamy vista and they're like right, let's go, let's get this done. That's how it works okay fair enough well, do you know what? on that very topic, it actually brings us to the title of this podcast today, which is bigging up your borrowing how can you get the best rate possible and also the dental specific stuff that people don't necessarily know. And actually the main thing that you were telling me about the other day that I thought to myself, ok cool, let's jump on a podcast, let's talk about this was how lenders will now operate. More than one lender is not just one will now pay schedules rather than their accounts. So that is your. That is your net income on your payslip. So you've got your principal and this is where people get confused Right income on your payslip.

Sarah, 2m 31s:

So you've got your principal and this.

Dr. James, 2m 32s:

This is where people get confused, right? Okay, just to make this clear, okay gross associate split yes number after that, which I call your net, but some people call you gross right, but we're calling it your net pay. Yeah, that's obviously your pay before tax and all sorts of kicking.

Sarah, 2m 49s:

But anyway, listen, I don't want to end the show. I'd be interested that the principal, uh, pays you into your bank account boom yeah yeah, so, so, yeah, really exciting. Because the challenge that we've had, uh for many years is uh, it's no problem when you've got a dentist. That's sort of done their typical fd1, 2 um, and then they go associate and we use their pay schedules there and that's absolutely fine. But where we have challenges with a lot of lenders is once people have got one or two years accounts, they they then want to work off your either your accounts or your tax returns and they will only use the income that's on them. I've now got two lenders and it doesn't matter how long you've been a dentist, for if you're an associate, so you need to be an associate because you need to have the uh pay away and um, you need to have a contract um, but I've got two lenders now. Uh, that will work off your last three pay schedules, so you can. It doesn't matter whether your income is going into a limited company, whether you're a sole trader, whether you've just switched from one to another, none of that matters. They will literally just work off your last three pay schedules, the income that's gone into your bank account, funds that fall for to annualize it, and that's the figure that they will use as your income interesting.

Dr. James, 4m 36s:

Well, you know what? There was one thing that stood out to me just then. There's like a little bit of a tnc there. You gotta have a contract right, and I is that's.

Sarah, 4m 46s:

I heard you said that right yeah, some of the one of those lenders wants.

Dr. James, 4m 51s:

Well, yeah, probably both of them wants to see the, the contract and the only reason to say that is in my four clinical jobs in dentistry, I only had a contract once, and I don't know if that was me who disproportionately worked in places that didn't have contracts. I don't know if that's a common thing. How often is that an impediment that you find, sarah, whenever you're having conversations with potential?

Sarah, 5m 19s:

Yeah, I well, since having this policy with a couple of lenders, everybody that we put and asked for a contract, they've had one Okay and I think you know, think the majority of people they tend to have the BDA templated contract. So I think the principals can easily get a templated contract from the BDA, so it's not as if they've got to spend thousands with getting a solicitor to draw up a contract or anything like that. It's the BDA templated contract is typical.

Dr. James, 5m 59s:

Gotcha. You know what gotcha. You know what it fully, I'm fully acknowledging there that my experience of dentistry may be misrepresentative of most people in that they use contracts maybe that is the case. I'd actually I'd actually I'd be in check. I'm gonna ask around on that one, just purely out of curiosity. For me it was it only happened in one out of my four jobs, but again that might have been misrepresentative of the general experience of most associates there. I just thought I'd mention that really the contracting, because that definitely stood out to me Okay cool. Anyway, good to know. So, with regards to the ins and outs of what these lenders would expect from anybody that they're potentially lending money to, needs to be three months history.

Sarah, 6m 42s:

Yeah.

Dr. James, 6m 43s:

Yeah, three months history. Yeah, yeah, three months history. Anything else we should know about in there? Any other stipulations?

Sarah, 6m 50s:

No, can go from a 5% deposit. You know, ideally you want to have a 10% deposit to get, you know, a half decent rate. But they can go to with a five percent deposit. Um, the rates that you're looking at, they're not quite mainstream but but they're not far off. You know, we're looking at 0.2, 0.3, 20 to 30 basis points, as they say, or 0.2, 0.3 percent. So it's, it's um, you know, a quarter to a third of a percent higher than the, than the sort of best buy tables which is not dreadful, right no? no, and that that's it. Like the thing is, is is for a couple of years. If, if you're, you know, if you, if you, if you're an fd and you haven't got any accounts, well, maybe just do a rate for a couple of years until you've got, and then at the end of two years you'll have two years accounts. But if you're, if you're, um, uh, sort of a limited company or you've, you've been trading for a long time and you put a load of expenses through, and so you know you could, you couldn't borrow the money. Well, you know then, if that's not going to change going forward, well, you know that you can have a five-year fixed and at the moment five-year fixed tend to be lower rates than the two-year fixes available and that would be representative of the fact that people think interest rates are going to go down.

Dr. James, 8m 40s:

Emphasis on think. Is that right, if I've understood my yes?

Sarah, 8m 43s:

yes, so the fixed rates are going to go down. Emphasis on think. Is that right? If I've understood my, yes. The fixed rates are priced um using what they what's known as swap rates. Um, and it's the lender swapping their variable rate for a fixed, for a fixed rate funds on the money markets and, uh, so. So the money marketeer will say right, you know, I'll give you 100 million, uh for you to lend out at, let's say, four percent, and so that over five years, and that lender will say, right, okay, then we'll, we'll lend that out at 4.25, we'll make a quarter ofa percent on it and um, and that's how that works interesting and not to get too technical, but I expect that that would be related to the returns on bonds in the market.

Dr. James, 9m 40s:

Are you with me? Yeah, because obviously, if they can put their money in bonds and they're going to get 3%, well, this lending your money to individuals is going to be slightly more risky than that, right? So interest rates go up, bonds interest rates go up and then that pushes on the swap rates, right? Yeah, that makes sense actually. Okay, fascinating, all right, cool. Anything else we need to know any more specifics about? Uh, these lending, uh these lenders that operate off payment schedules, anything else?

Sarah, 10m 11s:

any case studies.

Dr. James, 10m 12s:

Any case studies you can tell us about, we'll find out, of course, case studies, as in I spoke to somebody today who she is finishing her FD, has a contract starting in September.

Sarah, 10m 32s:

She has an NHS contract 5,000 UDAs at £13.50. £13.80, sorry so we do 5,000 times £13.80, sorry so we do £5,000 times £13.80, and that means her income is £69,000. We we will work on £69,000 for her borrowing potential. She's got quite a good deposit. So, based based on the 69,000, she could borrow up to 345,000 and that's five times her 69,000. And she hasn't even started that job yet.

Dr. James, 11m 18s:

Wow, I thought you said three months of history.

Sarah, 11m 21s:

Yeah, but they will go off. They will go off. She's got a contract in place which she has. They will go off the contract. Oh wow, if you haven't started that position.

Dr. James, 11m 36s:

I see Fascinating.

Sarah, 11m 38s:

Yeah, so that's good. I've got another one who I'm just doing the research for at the moment. Her tax return shows this is her 2024 tax year end tax return, so right up until April, shows an income of 72. But her last three months pay schedules show her income as £112. So if we were looking at five times income on 72, she'd be able to borrow £360.

Dr. James, 12m 16s:

On £112, she could borrow £560 very nice, okay, yeah, yeah so, and dentists love to borrow the maximum yeah, they do that's the thing right because they, they, I kind of, I kind of I do get the mindset right because they're thinking to themselves okay, well, I just want to get my forever home right, so I'm just gonna borrow as much as I can and then just grow into it effectively.

Sarah, 12m 47s:

Yeah, I guess it kind of does work, because their wages tend to go up with time, which helps mitigate the repayments really yeah, yeah, yeah, and they're good at good at paying it off, offset mortgages, you know reducing, reducing the capital life, you know it's uh, it's, it's very good uh doing that, whereas other medics, like doctors or whatever, you'll tend to find that they're a lot more cautious what is it about the dentist sarah? no, I don't know, I well, but I think is it because dentists are predominantly self-employed, aren't they? So they're less risk adverse, so is that? Is that the reason? Maybe more like entrepreneurial or orientated, I guess really, yeah, I think so, yeah there we go.

Dr. James, 13m 36s:

Well, yeah, it's, it's actually, it is actually true, and I maybe didn't realize how much more. How can I say? I had that in me until I qualified for a few years, and then I went to talk to my friends and you can kind of just see they have a different mindset whenever it comes to this stuff like yeah, yeah, uk dentists are like their own. They've got their own very specific way of looking at things. Very much, very much a niche, uh, like a well-defined niche right there. And then you have americans they're on like all other levels. It's like a well-defined niche right there. And then you have americans they're on like all other levels. It's like a different dimension right there. But yeah, no, listen, cool. Thank you so much for sharing what you've shared today. Sarah, I'm gonna ask you a question that everybody actually probably annoys the hell out of you. Where do you think interest rate is going to go over the next year.

Sarah, 14m 21s:

Yeah, let me get my crystal ball out. Uh, I think that we'll possibly. Well, I think the Bank of England base rate will come down, probably at the next meeting, but you know it will come down eventually. I think what's stumbling things at the moment is is worldwide pressure, because the uk inflation has come down and it's it's actually doing quite well, but in the states and that it's uh, it's a bit stickier, um, and you know, whatever, american, whenever, what? What's the saying? Whenever america catches a, a poll? Yeah, we sneeze or something.

Dr. James, 15m 8s:

Whatever the saying is yeah, I think I've heard yeah, and it's in relation to monetary policy, right?

Sarah, 15m 13s:

yes, yeah, yeah, yeah so, so I uh, I think they will come down. It's just, you know, it's just what is that time frame that they they're going to come down over? And that's really really the unknown and other worldwide things that are going on Ukraine, russia, that sort of thing. It all has an impact, doesn't it, on the rates, the economists and and that. So, hopefully, hopefully it'll be. I would hope that the bank of england base is going to come down half a percent, three quarters, by the end of this year, uh. But you know, there was a lot of people, uh, two years ago, when Liz Truss was doing her little test, I remember, on Ventus to invest people saying, oh yeah, you know, do a two-year fix because in two years the rates will be a lot lower. But you know, are they? The Bank of England base rate isn't any lower in two years. So you know, I'm always very cautious about making predictions because you know they are just a prediction. There's no guarantee what might happen.

Dr. James, 16m 40s:

Well, if you can predict them exactly, you'd be really wealthy, wouldn't you?

Sarah, 16m 43s:

Yes, it's worth wondering. It's worth wondering I wouldn't have been a mortgage broker for the last 30 years.

Dr. James, 16m 50s:

Well, this is it. You know you can predict those, you can predict the market, so that would be a pretty valuable skill right there. So, yeah, just important to caveat that all the things that we say, we're just making it clear that it can't be any more than speculation by definition. I don't even think they know what they're going to do until they go and just hammer it out. Basically, I was curious as well, actually. Well, yeah, do you know what? Like whenever it comes to interest rates, like where they are presently, actually, do you know what is it? Do you know what it is off the top of your head? The Bank of England interest rate right now 5.25. 5.25. Okay, I knew you'd know, because your finger's on the pulse, this is the stuff that you see all day long, but it was like what was it like point? I think it went to 0.25. Yeah, it's ridiculous. They were talking about that.

Sarah, 17m 41s:

Which that's when you know you've got people with 5-year fixed rates that you know just go over 1% or even point I did some clients at 0.99 five-year fixed. So you know that was the lender's margin that they were having then. But you know, that's the thing is, when you look at the five-year fixed rates that are starting with a four at the moment, that's what they were pre-credit crunch. You know, five-year fixed rates at around four percent was what they were pre-credit crunch and we've not been in the normal market since credit crunch because we've had lots of quantitative easing and and very low base rates and and that sort of thing. So you know, are we, are we just going to go back to what it was in the noughties, which you know? Perhaps two-year fixed rates are a bit high, um, at the moment compared to what they were in the noughties. But you know you, you'd perhaps, perhaps, get a two-year fix. I remember when I bought a house in 2003, I had the option of doing a two-year fix at 2.99 and a five-year fix at 3.99. Well, the five-year fix aren't that far off that now. So so maybe, you know, in two or three years time we might be back to them. There you go, there's a prediction you're.

Dr. James, 19m 19s:

Well, I'll be you're. You think a crash. Do you think there's a crash coming? Is that what you're getting?

Sarah, 19m 23s:

at no, no, no, no. Just what might happen with the? What might interest rates be? Because, typically, bank of England base rate. This is what annoys me with the press when they say, oh, bank of England base rate is going to go up and all these mortgage holders, 80% of the mortgage account holders, are on a fixed rate, so it doesn't have any impact on the existing borrowers until they come off their fixed rate. So, whereas when there was a last crash, you know, in 2007, there was a lot more customers on a variable rate mortgage, which then, if the Bank of England base rate goes up, has a direct impact on them straight away.

Dr. James, 20m 22s:

So, yeah, maybe the fixed rates will be around around that in, in a, in a sort of year or two's time, hopefully so that's a trend that you've observed over the last few decades, that a lot more people are on fixed rate now and versus variable rate back then yeah, there's, there's.

Sarah, 20m 43s:

The only time my clients tend to be on a on a variable rate is when they're either you know they're quite risk adverse and they're expecting the bank of england base rate to come down so they go on it there, or if their circumstances are going to be changing. Because you tend to find that on variable rate mortgages, trackers, and that you, the lender, doesn't charge an exit penalty if you, if you, want to redeem the mortgage, so. So I'll sometimes put people on that because they'll come to the end of their fixed rate but in a year's time they know that they want to move, so we'll, we'll put them on a tracker rate so that they have the full freedom of being able to go to whichever lender they want in 12 months time when they move.

Dr. James, 21m 32s:

Interesting. Well, listen, Sarah. Final knowledge, as ever. Thank you so much for your time today on the Genesim First podcast.