Dr James, 0s:

Dentists want to know how much they can borrow, but they don't want all this mumble jumble small print. They just want the headlines explained to them. And that's why I'm joined today by expert mortgage broker to dentist, Ms Sarah Grace. We're gonna be delving into the headlines of what dentists need to know whenever it comes to deciding how can we get the best mortgage and how can we get the lowest interest rate and hence lowest repayments. Looking forward to this episode. As ever, you can claim your CPD for this episode within the official Dentists Who Invest Smart Money Members Club. Smart Money Members Club also includes multiple mini courses and webinar series on finance for dentists, including how to become as tax efficient as possible, as well as understanding investing. All of this content counts as verifiable CPD, and you can download your certificates there and then upon completion of each lesson. In addition to this, we also include a whopping 10% discount on your dental indemnity and a 5% discount on lab bills for dental principals, amongst other perks and discounts for members. Please use the link in the description to claim your verifiable CPD for this episode. Alright, well this podcast is going to be exactly what it says in the 10. It's going to be a punchy and impactful podcast, Sarah. And we were talking about this off camera, weren't we? About the most common questions you get asked when it comes to dentists and the affordability for their mortgages. So if we can just make one piece of content that just goes bang and deals with all of them, I think that's going to be super useful. So we narrowed this down to three, the three most common ones. And number one was the multiplier.

Sarah, 1m 36s:

Multiplier, yeah. Hi, James. Hi. Hi. Yeah.

Dr James, 1m 40s:

Yeah, you'll you'll you'll be able to describe it better than me, the multiplier for the uh being able to figure out how much they can borrow, right?

Sarah, 1m 46s:

Yeah, so I would say that typically, you know, majority of dentists can probably get about five times income. It does depend on deposit. So, you know, if you're if you're earning less than 50,000 a year with a 10% deposit, you know, five times is is going to be more of a stretch than somebody earning 100k with a with a 20% deposit. Um, so I would say speak to your mortgage broker and and they will they will look at that for you. But five times is fairly commonplace. We can get up to six times. There are a few lenders that are doing seven times, but then you're not going to be getting as good a rate. So me uh I like to call myself the rate heart, um, always looking for the best deals for uh clients. And so, you know, six times income, you can still get a really good lender with a really good rate. Um, so that is possible. However, you know, that's six times your income. So that can be profit after corporation tax plus your salary. If you're limited sole trader, you know, it's your tax return um net profit. Um and and typically it's the average over the last two years. So if you've had them latest year being really high, well, they will average the last two years, so just be mindful of that. Um pay schedules is always an option though, anyway, so we can get around that.

Dr James, 3m 22s:

Nice. Um and you said there was a bit of a range there. Is that just dependent on the broker? Or would the range be slightly hard depending on the case? And there were certain variables within the case.

Sarah, 3m 35s:

Uh that yes, sometimes there is certain variables like you need to be earning over a hundred K per annum, um, or the application needs to have over a hundred K. Um, but I would say you know, speak to speak to a broker. Um if you're not getting the the answer that you want, speak to me and I'll I'll confirm whether you can. Because um that's one thing that I always find with dentists, you uh always want to stretch yourselves. Um they like to have the the larger large houses and um you know stretch themselves as much as as possible and uh probably quite bullish with their attitude to risk.

Dr James, 4m 22s:

Well, you know, it's uh it's it's an interesting one, isn't it? You've you've observed that with Dennis.

Sarah, 4m 26s:

I guess they like to, how can I say this, enjoy the spoils of all their hard work is is is maybe Yeah, and I think that possibly a lot of dentists, you know, uh principals or aspiring principals. So, you know, you you tend to find that entrepreneurs have a higher risk threshold. Um, you know, I do do the old mortgage for medics, uh employee GPs and that sort of thing, and they're they're ultra cautious in comparison.

Dr James, 4m 54s:

You know, it's interesting, and not to go on too much of a tangent, but I think that their profession trains them to be that way a little bit more than us. Uh because it's all about just avoidance of doubt, right? And that is uh yes, we dentists do that as well as clinicians. Uh however, we're rewarded whenever it comes to running our practice by rolling the dice a little bit more. So it kind of shapes us. It's like a chicken and an egg. Were we like that and then dentistry happened? Or did dentistry happen and then it made us like that? I don't know. I don't know the answer. It's an interesting one to ponder. Uh, but yes, anywho, moving on. Number two. Number two was debt and how it's treated uh by the lenders, specifically credit card debt, because a lot of people have this.

Sarah, 5m 36s:

Yes, a lot of people have credit card debt. So um one of the one of the classic uh answers that I'm given when I ask if they've got credit card debt is yes, I've got 10k on a credit card, but it's not percent. So almost like so you don't need to take it into account. Lenders will, because lenders will assume that once your zero percent deal ends in 12 months time or how whenever um that that that you will still have that 10 grand's worth of debt. So typically they take a payment of 3% off your affordability. So on 10 grand, um, you know, 300 quid a month is what they'll take off your affordability, uh, because they'll assume that you're going to have that 10 grand worth of credit card debt.

Dr James, 6m 30s:

Yeah, and given that pr that's per month, that's I guess that's quite a lot, really.

Sarah, 6m 35s:

Well, if you think about it, a three 300k mortgage is is a 300 pounds payment on a mortgage is is probably about 80,000 pounds worth of borrowing.

Dr James, 6m 47s:

There you go. Okay, right. So it's it's it's something we need to be aware of. And just just Sarah, obviously, because you're having these conversations and keeping everything fully anonymized, of course. If you had to lick your finger and put it in the air, right, because this is an interesting question to ask, right? If you had to lick your finger and put it in the air, whenever you're reviewing each and every case for their, I guess, affordability for a mortgage, what percentage of the time do people have credit card debt that they haven't paid off at the end of every that they haven't squared up at the end of the month? UK Dentists, Dennists Who Invests now has an official platform where you can learn about finance and obtain UK compliant verifiable CPD at the same time. The only platform that exists on which you can do both. The Smart Money Members Club has hundreds of hours of mini courses, webinar series, and live day recordings on all things finance slash tax efficiency for UK dentists. This includes complete courses on how tax works for UK dentists, finance so that you can invest and grow your own money, business so you can improve your profitability as an associate or principal, and for those out there that want it, there's also a mini course on how you can responsibly enter the crypto space using measured amounts of capital. I've gathered this content from the best of the best I could find in each respective area so that you know that this is how people at the forefront of each field advise their clients. The Smart Money Members Club also contains discounts on common things that UK dentists need to pay for on a regular basis. This includes a whopping 10% discount on dental indemnity, the offer to beat your income protection deal no matter what you're paying, and for the principals out there, 5% discount on lab bills and 10% discount on practice insurance. These are designed to offer hundreds, if not thousands, in annual savings. The purpose of this members club is to not only boost your monthly income but also manage your outgoings as much as possible and therefore create more profit. To celebrate the launch of the Smart Money Members Club, and given that the CPD deadline is coming up soon, I've decided to offer the first month of this platform entirely for free. This offer will end in the coming weeks as soon as the current CPD cycle is up. To collect your CPD for this podcast episode using the Smart Money Members Club, feel free to use the link in the description of this podcast.

Sarah, 9m 12s:

I've read an article saying that teachers are probably the worst profession for having uh sort of loans and credit cards because I think they get marketed a lot by um different uh financial institutions with teacher deals. Um but dentists are uh pretty good, but I have I have um, you know, I have had people, I think my worst I've seen is 180k on uh on credit card debts. So yeah.

Dr James, 9m 43s:

Let's hope it was an Amex and they got some air miles on that or something at the very at the very least or some good amount of it.

Sarah, 9m 50s:

Yeah, dentists love the uh Amex air miles, don't they?

Dr James, 9m 53s:

Yeah, I've got it's they they do. We're we're like like we're like magpies for those credit card deals, aren't we? Uh but yeah, you know, just to not to not to labor the point, but if you had to lick your finger in the air and put a percentage on it, maybe 10% of the time, 20% of the time. I'm just really I'm just curious.

Sarah, 10m 10s:

Um yeah, I would say possibly 20% of the time people do have a credit card. And when I say credit card debt, if you if you uh pay a direct debit and clear the balance every month, that's not classed as a credit card debt. Yeah, it's only it's only when you at you know you if you don't clear your statement at the end of each month.

Dr James, 10m 31s:

But but isn't that interesting, right? 20% is still one in five, right? And you know, you're just we're not we're not holding you to that, right? It's anecdotal, right? But you actually get to see this a lot of the time. 20% is still one in five, and from what you're saying is relatively speaking, that's comparably good to other professions. Isn't that interesting?

Sarah, 10m 50s:

I I think it is, yeah. And like, you know, but August 25 they they said that there was 76 billion outstanding on credit cards uh in the UK. So they said that the average household has about two and a half K worth of credit card debt.

Dr James, 11m 9s:

Dang. And in America, I'm gonna guess that's a lot more.

Sarah, 11m 12s:

But Oh, I think it's gone over a trillion in the US.

Dr James, 11m 16s:

Yeah, I and I'd I'd be interested to know per household as well. Uh, I know we we won't have those stats per hand, but I bet I bet it's worse than over here because their debt is just so normalized to them. Like it's normal to just use your credit card to uh purchase depreciating assets like cars and everything along those lines. And I do often say that to myself, I'm looking up my window, and there's people, lots of people really nice cars, and I'm like, who are all these people that are minted enough to afford that and you know have a decent lifestyle as well? And there's just something not quite stacking up there, you know, the money's coming from somewhere. Anyway, not to go down, not to not to digress too much, but yes, anyway, yes, numero numero three, uh, that is we were talking about this off camera. This is cars, car finance, car repayments, and how they interact, I guess, with mortgage.

Sarah, 12m 6s:

So so whether you've got uh you know you know HP rent agreement or a car loan, you know there there are some lumpy payments. I think two thousand two hundred was the most that I saw on a car payment each month. They they they will you know two thousand two hundred is is equivalent to probably about a four hundred K mortgage if you if you think about it. So that that they can that can really affect your affordability.

Dr James, 12m 41s:

Yeah.

Sarah, 12m 42s:

But school fees is another big one as well. You know, a lot of people are paying school fees or nursery, nursery costs.

Dr James, 12m 49s:

Um Well, do you know what I like when you said off off camera, right? It's like when they when the bank you said this before, and you might have said it on camera, but just to reiterate it, because I think it's a helpful way of looking at this, these sorts of situations. The banks basically can look at you like you're a business and they look at your profitability, right? So what happens, right? You get your if you're a dentist and you're self-employed, right? You get your your turnover effectively paid into your bank account, right? Some dentists call that your gross, some call it your net. It depends on how you look at it. It's your net after your associate split, but it's your gross taxes, right? Just to clear that one up, right? Yeah, that goes into your bank account, tax comes out of it, all these other things we've just talked about come out of it, and then after that, that's your profit, yeah. And that is what they use to assess your affordability, right, Sarah? Yes.

Sarah, 13m 42s:

Yeah, yeah. So it's your income less your expenditure, and that and that's what you're so you know, somebody earning a hundred thousand with no outgoings whatsoever, other than your normal utilities and and that sort of thing. They should be able to borrow, in theory, than somebody earning a hundred thousand with two children, they've got school fees, they've got a car payment, and they've got a credit card balance, which they don't clear each month. You know, they they don't have as much liquid cash every month than the hundred K with no with no commitments.

Dr James, 14m 21s:

For sure, for sure. And do they write do they get right down as granular as how much you spend on your food shop and stuff like that? No, they don't.

Sarah, 14m 29s:

There was a bit when when this all sort of came in with MMR, when was that? Oh 2017, I think it was, um, when they were sort of uh the press were saying, Oh, you know, they they're gonna banks are gonna start asking me how many times I have filled sake a week and and whatever. They they don't. What a lot of lenders will uh use the Office of National Statistics data for your postcodal area, so they will know four bedroomed house, typically in that area, how much your utility bills are going to be, and so they'll just apply the the ONS data.

Dr James, 15m 9s:

Right. So they they basically look at the major expenses, but it's not super granular. Um so it'll be all things we mentioned plus some ONS data in there somewhere, but it's a bit too.

Sarah, 15m 22s:

But d don't forget that if you're buying a flat, you're going to have a service charge and ground rent. That cost will also be taken into account.

Dr James, 15m 32s:

Interesting to know and very valuable. Any other ones? I mean I'm actually intrigued.

Sarah, 15m 37s:

Um those are the biggies. Some lenders ask if you've got much in the way of travel costs commuting to work. Um but but and and you know, lenders will look through your bank statements. So if you've got a payment going to mum and dad two hundred pounds a month with a reference loan repayment. Um lenders will ask questions about that, so just make sure that what you've got isn't on your bank statements.