Dr James, 0s:

Why is it proven more difficult than expected to get a mortgage and am I getting the best deal and how is that affected by my career as a dentist? We've got expert mortgage broker Anish Patel on the podcast today we're going to be talking about the most common reasons why dentists A can't get mortgages or B can't get the best deal whenever it comes to their mortgages over the next 30 minutes, looking forward to it. Why can't I get a mortgage is a question that sometimes dentists out there ask, and actually it's not always necessarily the case. You just need to know a little bit more about it, which is exactly what we're going to talk about today on the podcast yeah.

Anish, 34s:

So this is like a common question people ask. They go why can't I get a mortgage? Because they've got you know, for example, these amazing practices they're doing really well. And in reality, what happens for a lot of dentists is they are going by, for example, the salary and dividends right, assuming it's a limited company. Let's work off that example. If it's a limited company, typically what you do is you draw salary and dividends from the business. Now what happens with a lot of dentists is their businesses are thriving, so there's a lot of income coming into the business. They only actually want to take out what they need to take out, which is quite natural. Like imagine you're taking out money for the sake of taking out money. You're paying unnecessary tax on it, so you take out what you need to take out every single month. Now most lenders not all most lenders will look at your salary and dividends and average the latest two years income figures right, when you're looking to get a mortgage. Now those lenders what I find a lot of times for my clients are not the best suited for clients like dentists, right, trying to get a mortgage. Because what happens is these type of clients have a lot of profits within the business and you need a lender to maximize those profits for affordability, to give them the mortgage loan that they need. That's the main concept of it.

Dr James, 1m 49s:

I see Excellent. And you know what, in your experience as a mortgage broker, you're going to come across some common scenarios that dentists run a file off whenever it comes to getting a deal or getting a mortgage over the line. And we were talking about this a little bit off camera and I think one of the first things that you said, one of the most common ones, is not enough personal income, or at least where we perceive we don't have enough. Should we talk a little bit more about that?

Anish, 2m 14s:

Yeah, so in terms of the personal income, let's go back to the limiter company, right. When you've got salary and dividends, that's the personal stuff. But when you've got a good, healthy business, as a lot of these dentists do, right, they've got their retained profit within the business, which is profit before any corporation tax and, trust me, they know what that is because their accountant would definitely be telling them these figures and then they've got the profit after corporation tax has been paid. There's lenders that will use their salary plus those healthy retained profits gross or net, depending on the mortgage lender and I'm talking about high street lenders yeah, I'm not talking about secondary lenders with higher rates high street lenders that will use those income figures in the affordability assessment of the mortgage loan for them, like, I've literally done a mortgage recently for a dentist who actually completed today, on the day of recording, for 1.7 million, and that was just using company profits alone, right, and it's all about a broker understanding how the businesses are set up. So I know we keep going back onto the limited company, but typically this is how our dentists are usually set up and a lot of times what happens is you've got the main practice and then you've got a holding company right, and your broker just needs to understand how it works. Typically what happens is this is on advice from their accountant that the dividends are usually paid into the holding company and then the salary is taken from the main dental practice right. But there's lenders that will use the main dental practice income in affordability for the mortgage loan for them. I've seen it multiple times. You know like it just massively increases the loan amount that they can get. And when I say high street lenders, think about it this way. In the profession that they're in, they are an attractive proposition for high street lenders, right, because dentists, typically they're not going to get out of business anytime soon unless the practice has not been run properly, which is very rare, right. You've got the years of accounts which show the sustainability. You've got years of accounts showing the turnover of the business. So a lot of lenders, because they're going to use these gross profits or net profits from the business, will bypass the personal income and just look at the profits from the business to give them that higher mortgage loan that they need to get the home that they want 100%, and an important distinction to make is this is for the affordability side of things.

Dr James, 4m 26s:

so whenever it comes to repayment, it might mean that we're taking a little bit more out of the business, but at least we're not limited to say, for example, 50k, which is the basic tax rate, which is going to severely restrict the affordability that we're going to have for a house honestly, I see it all the time where people have like a personal income like 12 12 000 pound per year and then they'll take like I don't know 38 000 pounds per hour because where they're at in their life there that's enough for them to live on, right.

Anish, 4m 52s:

but obviously you're not going to move from a smaller, a bigger house to a smaller house unless you're downsizing and a lot of these that then it's on. So they're upsizing, they're looking to get either a bigger home or a forever home, and this is where they need to ensure that. Yes, it's not about the monthly payment, but that's something we work on with our clients. We go through the budget planner because, even though, for example, a mortgage lender may say you can borrow X amount, we need to make sure that that income is affordable and sustainable and you can actually you're comfortable with the monthly mortgage payment as well at the same time.

Dr James, 5m 23s:

Understood. And then I was just curious as well, just on that front. Whenever it comes to the affordability and the assessments and everything along those lines, people throw this around an awful lot, and I think this is a little bit of an urban myth or an old wives' tale that there's a limit in terms of how long you need to be trading for before a lender will be able to lend to you. Is that correct? Yeah?

Anish, 5m 47s:

There is with mortgage lenders, but it depends on the lender once again. So some lenders will need two years trading with two years tax returns, or two years company accounts right. There's certain lenders and as again we're talking high street lenders here that will use one year's income figures sole trader, partnership, limited company right, but you've got to understand this with one year's income figures. Yes, the profession is a big key in this, so I'm not going to say that it's not, but it's about sustainability. Now, the way people need to look at is imagine you were to lend me money. How likelihood is it that you're going to pay me back With one year's income figures as a self-employed person? This is why the lenders are restricted. There's less lenders available because it's a risk for them to give you that mortgage loan right, because you don't have that track record history. But there are lenders that will use one year's income figures, especially depending on, for example, dentists. You could get some professional mortgages as well, depending on the qualification when they're qualified as well. That is available. For example, if they're locum in, for example, you can get three months. There's a lender out there not many, but there's a lender that actually used three months bank statements right. They'll average it and annualize it to use as a salary for affordability for the mortgage loan, and this is high street again, what we're talking about. So these things change all the time. So like, for example, today is what the 3rd of February 2025. This is lending criteria approximately as of today, but tomorrow anything could change. This is why it's key for anyone who's looking to get a mortgage not just at Dentist, but anyone to have constant communication with their broker, because one thing I want to say is that your accounts get submitted at one point right, that is your income for the whole year. So you want to ensure that you're working with your broker to be able to try to achieve the mortgage loan that you want. If the broker tells you six months before this is how much you can borrow in six months time, that could change massively, so you need to make sure you've got that communication.

Dr James, 7m 43s:

Would I be correct in saying that if you don't have as many or as long a period of company accounts as some lenders would prefer, that the interest rate will typically be higher on the lenders that will lend to you? No?

Anish, 7m 57s:

So, in terms of the first point of call is always your high street lenders, right? So, for example, they're the ones that will give you the best products as of today. Now, not everyone fits high street, so what I mean by that is just because your income is great and, for example, you've got one year's accounts If your credit score is not the greatest because ultimately that's what it's going to come down to with the mortgage lender, right, your income could be amazing, but if your credit score is not great and it doesn't meet their lending criteria, you actually may not qualify for the mortgage loan with them. That's where we start looking at secondary lenders they're called subprime lenders, where the rates will be higher than your high street lender, but they would consider something that your high street lender won't.

Dr James, 8m 36s:

I see Okay. So that's the kind of catch there slightly, but the key thing to know is this podcast is entitled why Can't I Get a Mortgage, and actually that's not necessarily true. We just got to know how to manage it.

Anish, 8m 48s:

Correct. Yeah, so the thing is, everyone can typically get a mortgage, but ultimately it's going to come down to a few things the mortgage loan that they need, their personal circumstances. Their credit score is key in everything. You could have all the income in the world, but if your credit rating is no good, you may not be able to get a mortgage, put it that way.

Dr James, 9m 6s:

So you need to make sure that you always got your credit, your credit history, at least on point, so when it comes for you to get that mortgage, you know, actually, let's talk about this, let's expand upon the credit history side of things, because a lot of us dentists just take for granted that our credit history is good and, listen, you'll know more about it than me. But it's ranked from like zero to 999, I believe, isn't it?

Anish, 9m 28s:

Yeah, and it's like anything over 800, something lower than those lines is good. 900 is like exceptional, whatever. Let's say there's some dentists out there that, for whatever reason, their credit score is lower than they like. How can they boost that? That's where they need to get advice. It's like, for example, me going to a dentist. Right, they say, all right, this tooth needs to get sawed, or this is what you need for your Invisalign, whatever it is. This is what we do as well. Right, we're providing them a prescription, basically to tell them that this is what you need to do. So, if a client comes to me, for example, when I'm about to look, your credit is not the greatest. You've got all the income in the world, but your credit's not the greatest, right, I'll be like well, this is what you need to do to potentially boost the credit rating.

Dr James, 10m 9s:

Understood, and this is why I wanted to touch upon this, because I've seen people before and their income on paper they say, well, a hundred K a year, you know, but their credit history is not that actually that good. Yeah, and this is. It's not actually something you're aware of until you potentially look it up on with the various websites out there that do credit scoring or you come and have a conversation with someone like yourself. So maybe we're getting more into. We definitely don't want to be too prescriptive on this podcast because obviously that would constitute advice. Maybe a better question is what are the typical parameters? That you see are one of the most common reasons that people run afoul of the whole credit scoring system, even though they have good income.

Anish, 10m 44s:

So one of the most common things I see is like two things actually. One is late payments on credit cards. So late payments like, for example, when you get that statement every single month from your credit card company, have a direct debit set up even just to pay the minimum company, have a direct debit set up even just to pay the minimum. Just say it's like £2,000, which is the full balance, but the monthly payments is like £15 a month. Right, if you set the direct debit up just to pay the minimum £15 a month and you have intention to clear it after, or you may not, but as long as that £15 has been paid on time before the cutoff date on that statement, you won't incur any late payments. A lot of people think that they would want to manage it themselves and you could. But one late payment could transpire to two, could transpire to three, and I've seen it happen time and time again. I've seen people take Klana right. You know, like Klana it's like a credit line like ASOS, for example right.

Dr James, 11m 36s:

Yeah, I've seen that thing. Buy now, pay later, right.

Anish, 11m 39s:

Yeah, little things like that right. I've seen it actually not ruin people getting a mortgage, but reduce their credit score. And also when people move address right. So a lot of times what happens is because they don't have a credit file open. For example, the old utility company is writing to them at the previous address, so they're not getting the letters right. So what's happening is eventually that turns into a default. Now they only realise that when I see their credit report. Now, of course, it's not their fault and they're going to try and remove it. But mortgage lenders typically with your high street lenders if you want to apply for a mortgage as of today, they're going to look at your credit file as a whole, right, so even a letter to say, oh, this, this, um, what's this? It was an error on our part because we moved. That still needs to be removed a lot of times from your credit file to boost the score back up, and that could take weeks if not months I've got a question on that.

Dr James, 12m 34s:

You know, when it comes to paying hmrc and sometimes, like usually, if you can't pay immediately, they'll work out something with you and they'll be like right, we'll spread it over six months, something along those lines does that impact your credit score?

Anish, 12m 45s:

not from what I've seen. No, oh, it doesn't, because your credit score doesn't have your, your tax balance that you owe to HMRC. Right, it will just show your existing lines of credit, so your credit cards, your bank, your bank account, your utilities, you know, things like that. It won't actually have that hmrc. So if it's like a payment plan, for example, and you're paying back 500 pound a month or something like that, that shouldn't impact your credit score.

Dr James, 13m 9s:

No, because you're still paying it back good to know what about locum dentis and I realize this is going to only appeal to a very niche portion of the audience and dentists who invest, but we need to ensure that these people are informed as well. So, locum dentist how does that move things around?

Anish, 13m 26s:

so it's the same concept. I think I've touched on it before. There are a few lenders with three months bank statements, right literally. They'll just add all the income up and annualize it, but assuming they've been in the same line of work. There are lenders just say, for example, people have gone from a limousine company to straight locum in and they may not be operating by a limousine company, but it's the same line of work. There are lenders that could consider that by exception as well. So sometimes it's not a one-size-fit-all, but as brokers we have access to these certain lenders, so some lenders take a common sense approach so you can actually send an email of the case. This is what's happening with the client. They've gone from A to B. The reason why they've gone to here is due to this. Can you look at their income? Because sometimes it's just the structure of the way they're getting the income has changed, nothing else. And a lot of lenders dentists are attractive clients for mortgage lenders just because of the nature of the work and the demand for it. It's always going to be there. It's going nowhere. And for any of you guys that want to get any mortgage tips, just follow me on Instagram, Anish Patel Mortgages, or have a look at my website, www.anichemortgages.uk.