Home' News Bulletin : ADA News Bulletin July 2015 Contents 43
3. Ongoing banking services: The lenders provide different
banking structures and services to deal with your ongoing banking
needs. If your needs are not that complex (i.e. you do most of
your banking online, etc.), then I wouldn’t place a lot of weight
on this factor.
The one final consideration is the bank’s valuation of your
property. There is no point in using a lender that lends 95% if
its valuations are always too low. In this instance you might be
better using a lender that only lends 90% of a high, more realistic
valuation. Therefore, it can be wise to approach multiple lenders
or a mortgage broker.
If your situation is complex or a bit ‘outside of the square’, it is
possible that the abovementioned offers will not necessarily fit
your circumstances. In this situation it might be possible for some
lenders to offer tailored structures that allow you to cost-effectively
utilise your equity and minimise your cash flow and interest bill.
how to take full advantage of these deals
Don’t be complacent – you really need to do some shopping
around and speak to a couple of lenders. If you are not prepared
to spend this time investigating your options then engage the
services of a mortgage broker experienced with assisting dentists.
Borrowing 90% to 95% of a property’s value can provide a
number of benefits:
• Buy your first home now – if you have recently graduated
you might be keen to get into the property market and buy your
first home. The ability to borrow 95% to 100% will allow you to
do this sooner.
• Invest more sooner – the ability to invest more sooner allows
you to benefit from the major necessary ingredient that every
low-risk investment strategy needs: compound annual growth.
The difference between buying a $600k investment property today
versus in five years’ time amounts to an additional $1.9 million of
equity in 30 years’ time.
• Upgrade or renovate your home – you may have worked
hard to accumulate the amount of equity you have in your home
now but are ready for an upgrade. Borrowing a higher percentage
will allow you to upgrade sooner – especially important if you plan
on keeping your existing home as an investment.
• Leverage residential equity to fund your practice –
commercial practice, equipment, fit-out and goodwill loans
typically attract higher interest rates and sometimes are more
draining from a cash flow perspective if they require principal
repayments. Sometimes a better solution is to access equity in your
residential properties via a standard investment mortgage and use
these funds to fund your practice debt.
• Help your kids get into property – more often our clients
are talking to us about helping their children get into the property
market and how to structure it to ensure the family is protected.
Sometimes using a loan against the equity in your investment
property (not your home) is a good way to structure this. If you
have more than one child you may need multiple facilities. This can
be a bit of a minefield so please get some professional advice.
don’t Mix Business with pleasure
I have been taught a valuable lesson through some of my clients’
experiences to never mix practice and personal lending. That is,
do not have your practice transactional business banking
and/or lending with the same bank as your personal home and
investment lending. The reason for this is that the bank has too
much control and too much information. If you apply for an
investment loan, they can look up your practice bank account and
start asking lots of questions whereas if your banking is elsewhere,
they will normally just look at your tax returns. Never put your
eggs in one basket.
you’re in the driver’s seat!
As I have hopefully demonstrated, there are lots of offers available
to dentists that allow them to leverage their income to build an
asset base. Debt is a great servant but a bad master so you always
need to borrow safely, consider the impact of future rate increases
and ensure you have loan and cash savings buffers. It is possible
that just one lender won’t necessarily fulfil your needs.
Stuart Wemyss is the founder of Dentists Home Loans, a niche mortgage
broker that exclusively works with dentists to help them get better rates
and service from their banks and build wealth. Dentists Home Loans is
backed by a team of experts in Stuart’s full-service boutique financial
services business, ProSolution Private Clients – a long-time supporter of
the ADA. Contact Stuart and his team at www.dentisthomeloans.com.
au Readers should not act only on the basis of material obtained in this
article because the contents are of a general nature and therefore do
not take into account each person’s individual circumstances and may
be liable to misinterpretation. Do not act upon any of the information
contained within this article without first obtaining specific advice from a
financial tax advisor.
Dentist Home Loans assumes no obligation to update this publication
after it has been issued. Whilst every effort has been made to ensure
accuracy, information contained may not be complete, may have changed
or may not be relevant to, or appropriate for your circumstances.
“Most of the packages on offer
allow dentists to borrow certain
percentages of a property’s
value (i.e. more than 80%)
without charging lenders
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