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Dentists Who Invest

Podcast Episode

Full Transcript

Dr James: 

Fans of the Dennis who Invest podcast. If you feel like there was one particular episode in the back catalog in the anthology of Dennis who Invest podcast episodes that really, really, really was massively valuable to you, feel free to share that with a fellow dental colleague who’s in a similar position, so their understanding of finance can be elevated and they can hit the next level of financial success in their life. Also, as well as that, if you could take two seconds to rate and review this podcast. It would mean the world to me. What that would mean is that it drives this podcast further in terms of reach, so that more dentists across the world can be able to benefit from the knowledge contained therein. Welcome. Welcome to the Dennis who Invest podcast. Good evening everyone. Welcome back to another episode of Dennis who Invest official podcast. What episode are we on now? I believe it’s number 38 off the top of my head, but don’t hold me to that, because we’ve gotten through them thick and fast these days. 38 in, wow. How long have we been going about? Nine months. My guest. You may well you will recognize him. I’m sure he’s on the group. He’s quite prominent, he’s answering loads of questions, he’s always there, he’s very helpful and we have, of course, shot a previous episode on this very same subject that we’re going to be speaking about again today, which is mortgage. A man who doesn’t really need much of an introduction because he is, as I say, he’s always out there, out and about answering questions, mortgage-related and otherwise on the group. What we’re going to introduce him anyway? His name is Vinay Rathod. How are you, vinay?

Vinay: 

I’m good, buddy, how are you doing? I’m answering. I think most people will probably recognize me from my memes. There you go, so most people will probably recognize them, the memes and the bad jokes. Yeah, another claim to notoriety.

Dr James: 

Another claim to notoriety.

Vinay: 

No. I’m joking.

Dr James: 

I’m sure they’re good memes. I haven’t actually seen your memes so I can’t comment. I’m sure they’re good. I’m sure they’re good. How are you today, vinay? Are you surviving in the heat?

Vinay: 

About. Just about I’ve got the fan on, so if that interferes with the audio, just let me know. But I think we should be okay, I won’t melt yet.

Dr James: 

I think we’re good to go Brilliant, awesome. So, as we said just a minute ago, this podcast is, of course, on mortgages, and the idea is that we’re going to use this podcast to supplement the previous podcast that we shot on mortgages. So if you haven’t listened to that one already, it’s Vinay’s very first episode with myself. Off the top of my head, I believe it’s episode number five. That was way back when, way back in the day, does that?

Vinay: 

ring a bell. Does that?

Dr James: 

sound right. Does that sound right to you, vinay? It was very, very early in the podcast journey, but anyway, yeah, regardless.

Vinay: 

If it wasn’t long after you started. Yeah, no it wasn’t.

Dr James: 

We’ve burned through these. We haven’t even been going a year and episode number 38, which is not, but I enjoy doing them. Hopefully everybody enjoys listening to them as much as I love them.

Vinay: 

Yeah, I’m sure they do. It’s built up great momentum.

Dr James: 

Yeah, it’s been crazy, it’s been quite the journey.

Vinay: 

Yeah, everyone appreciates the time you put in as well. It can’t be a quick and easy thing to keep on top of mate, so I’m sure everyone’s very grateful. We are.

Dr James: 

Thanks. I do enjoy it, which helps a lot as well. But yeah, there’s quite a bit of work that goes on behind the scenes. It’s editing videos. Oh my goodness. If anybody out there who’s edited videos, they know my pain Getting those little transitions. They’re the devil. They are the absolute devil, but it’s worth it. When you can make it sound, there’s a lot of satisfaction, I suppose, in making it sound nice and smooth and transitioning and all the rest, or at least I enjoy it anyway, as I say. So, yes, as we were just talking about anybody who hasn’t listened to that first episode, it might be worth a listen because it’s going to complement this episode very, very, very nicely. What we’re going to do is we’re going to build on the knowledge imparted within that podcast, talk about the mortgage environment and talk about how it has evolved since we shot that podcast. Because, as we know, stamp duty even though from memory we did say in that original podcast we thought stamp duty would be reinstated by now Correct me if I’m wrong, vinnie we still don’t have stamp duty. Is that right? Still on holiday?

Vinay: 

No, we do as of the well yes and no. The main discount on stamp duty ended at the end of last month, which was the one where you would save up to 15 grand in stamp duty on up to half a million or over half a million. There’s a marginal discount on stamp duty available until the end of next month where, if you buy at a certain value, you might save a two, three grand. But it’s not what it used to be, so you might as well assume that the big stamp duty discount is pretty much gone there. I see and there’s a little one left for people who have yet to complete.

Dr James: 

Interesting. So I’ve learned that today, because I was still under the illusion that we were living in the stamp duty holiday. Not quite.

Vinay: 

I’ll give a little little bit of info to yourself and anyone who listens. The website to use is stampdutycalculatororguk, and the stamp duty, when calculated, is tiered like income tax. It’s not possible now to quickly work out off the top of your head what percentage of stamp duty is, because it’s tiered. So you scroll down, there’s literally one box says purchase price and there’s three tabs above it First time buyer, moving home or an additional property. So if you’re keeping your old place and buying this one, you put the purchase price in. So in this scenario, let’s say 500,000 for a first time buyer. Well, let’s say a home mover actually would be, because first time buyers have some slight differences. What you see here is the stamp duty currently is 12 and a half grand. It tells you before 30th of June which is nice that it reminds you that you’ve missed that it was zero. It tells you from 1st of July to the 30th of September the stamp duty is 12 and a half grand, and then after the 30th of September it’s 15 grand and it literally lays out on a table underneath your calculation. So, stampdutycalculatororguk, put in the figure, select the correct tab, press calculate and it will tell you what your stampduty bill is going to be at what date?

Dr James: 

Brilliant. Thanks for that. I didn’t know that we’re still living in this pandemic, of course, which was another thing we I’m sure we mused at the time that we shot this podcast that it would be a thing of the past. But here we are, we’re still in the midst of it still in the midst of it, which is nuts, and you know well. It’s still a transpiring situation really, I guess, and I know that that’s impinged upon what you do as well, vinay, so I was hoping that you could speak a little bit more on that and how that’s changed, the mortgage environment and what we can expect as borrowers.

Vinay: 

It’s made it quite difficult for a lot of people to get quite as much as they used to. And when I say for a lot of people, self-employed people which sadly means most of the people who are going to listen to this self-employed applicants have seen cuts in income multiples. So the average income multiple is about four and a half at the moment for self-employed applicants. The difficult or the slightly unfair part of it is if one applicant is self-employed but the other isn’t, both applicants will be subject to a reduced income multiple at 4.5. There are some lenders that will do 5 or 5.5, but only if you’ve got a decent deposit and your income is above a certain amount. I can’t really give you a single answer on that because there’s different combinations of things that would work will get you the higher income multiples. So basically, bottom line is for a large number of people who are looking to apply for mortgage at the moment maybe surprised that they’re going to get less than they might have been told if they looked at this a year and a half ago. So banks are looking at your last three months of bank statements if you’re self-employed, so if you say you’ve got a net profit of 60 grand, they want to see a minimum of around five and a half grand a month being banked for the last three months on your bank statement, which would correlate to a turnover of just over 60 minus some expenses. Yes, 60 grand looks reasonable If you’re telling them you’ve got a net profit of 60 grand but your last three bank statements show three and a half grand a month. They’re not going to use your tax return figures to lend. They’re going to say you’re not continuing to earn that level of the moment. So that’s a bit of a challenge for some where you might have had a couple of P6s, sa302 showing 100 grand earnings, but if at the moment you’re not earning about eight, nine grand a month or nine grand a month plus, you’re not going to get that size of mortgage on that income. So there’s a few more intricacies to be considered when trying to calculate a maximum loan. The other factor that is quite relevant is the size of deposit you put down can influence the mortgage size that you will be approved for. There are now 95% mortgages available with a 5% deposit but you’re going to get a bottom income multiple on that. The rate is going to be horrendous. Any dentist listening to this who wants to buy with a 5% deposit. I urge you just to rent for a bit, if possible, and come back with a bigger deposit, or you’ll pay a ridiculous rate. At the moment, the loan to value is important. If you can put at least a 15 or more percent deposit down, you’re going to be treated far more favorably by lenders.

Dr James: 

Real quick, guys. I put together a special report for dentists entitled the seven costly and potentially disastrous mistakes that dentists make whenever it comes to their finances. Most of the time, dentists are going through these issues and they don’t even necessarily realize that they’re happening until they have their eyes opened, and that is the purpose of this report. You can go ahead and receive your free report by heading on over to wwwdentistuneinvestcom forward slash podcast report or, alternatively, you can download it using the link in the description. This report details these seven most common issues. However, most importantly, it also shows you how to fix them Really. Looking forward to hearing your thoughts. Let’s see, let’s see. And was that? I know that this. Obviously, this podcast is specifically about dentists. Well, it’s aimed at dentists and the majority of our listeners are dentists, so that’s gold dust for dentists to know that. In addition to that, is there anything else that we should know? we’ll be aware about as dentists within the mortgage market.

Vinay: 

Is it about dentists in the mortgage market?

Dr James: 

Yeah, well, I was just saying in addition to that, because we want to hone in on dentists and give them as much knowledge as possible in this episode.

Vinay: 

So I mean dentistry still has advantages over being an unprofessional, self-employed person. So professionals doctors, dentists, architects, solicitors, veterinarians, so you know the usual. If your parents want to tell everyone that my son is this for a living, they’re probably classed as professionals, they’re the elite of degrees as such and the banks will be a little bit more accepting of that than someone else who is self-employed not in one of the professions. So, for example, under limited circumstances we can still get a mortgage based on a UDA contract for a dentist, even if they don’t have a tax return. For private dentists it is possible in the strongest situations to get a mortgage based on a projection. But this is where it becomes increasingly difficult, increasingly important to have a bigger deposit. A bank isn’t going to lend you based on a projection if you’ve got only a 5% or 10% deposit, because, frankly, they don’t want to lend to you at all with only a 5% deposit. So I think the biggest thing that you can do that will have the biggest positive impact is have a bigger deposit. That will determine the interest rate you get, but it will also determine how keen the bank are to give you a mortgage at all. So it might just be that you can’t get the house you want with a smaller deposit because the bank won’t lend you enough.

Dr James: 

Cool, cool, anything else. So that’s dentists. We’ve drawn a line on the dentist and nothing else they should know, because we want to get as much information as we can. I know that you specialise in dentists.

Vinay: 

I’m not going to talk about it anymore on time SEISS grants.

Dr James: 

Yeah, that was actually related funding that was on the agenda right here. We wanted to know we were going to talk about it at some point COVID funding and how the SEISS grants may be a problem, I feel like, for anybody out there who’s listening, who may not know what an SEISS grant is, perhaps there will be some. I know that lots of dentists are aware of it. Maybe it might be nice to explain what those are first of all, and then how well what we discussed about it might affect it.

Vinay: 

Sure. So self-employment support scheme I think SEISS grants were available to self-employed people who had a net profit of under £50,000 in the previous two years. I’m going to talk about it, but don’t quote me on that. I don’t know the exact qualification criteria of how long you need to have been self-employed. So if you had a net profit of over under £50,000, you could apply for a grant. The grant you pay tax on the grant, so it goes through its income on your tax return, so it bumps up your headline profit figure. So what that means is if you’ve got a 70-gram profit in 2021, a good part of that may well be the self-employed grants. So you could have 20-gram worth of SEISS grants, for example, but a 70-gram net profit, dentistry had made 50-gram. Some lenders will take the SEISS grant off and say you earned 50-gram. Other lenders will. If you revert back to what I was saying a moment ago, they’ll expect you to show bank statements showing that level of turnover With the SEISS grant. So that’s the self-employment income support SEISS scheme. Forgive me because I didn’t qualify for them, but the SEISS grants were available to people who earned under £50,000 net profit, I believe, averaged on their last two tax returns. Again, don’t quote me on the exact qualification criteria because we have nothing to do with the application of that. We just see on the tax returns. How much can we know to ask them if they have had any. So if you have had any funding from the government then you’re self-employed. It would have been paid to you as a grant which then gets put through as income on your tax return. So if you had 50-grams you earned from dentistry and 20-gram worth of SEISS grants, your profit on your tax return would show 70-grams. Different banks are treating this in different ways. Some banks will not let you apply for a mortgage if you’ve had any SEISS grants in this tax year because they’re saying if you still qualify for SEISS funding in the 2021-22 of the two tax year, the business must have been pretty badly affected. We don’t want to lend. Other banks are saying if you took more than X amount of SEISS grants, we won’t give you a mortgage. Other banks are saying we don’t care about the SEISS grant, as long as your current turnover reflects the total profit. They’ll take your SA302 figure at face value. So even if you had 50-gram income from dentistry and 20-gram SEISS grant, happy to consider you a 70-gram earner. As long as your income is 6,000 to 7,000 grand a month, the turnover should exceed what you’re saying your net profit is if you pro-rotor it. So has it affected things? Definitely. It just means that it is that much more important to use a broker who knows what they’re doing. When it comes to self-employed applicants. You go to a generic mortgage broker where one out of every 10-20 people are self-employed. They’re not having these conversations regularly. The banks are changing their lending policy for self-employed people at the moment. You guys are their least favourite people, sadly. So they’re shopping and changing their lending policy to control business volumes in the areas they want the least, which is small deposits and self-employment. So it’s often quite a challenge to get even a simple client the best deal, because we need to know which lenders the one that’s coming up with the lowest rate at the top, santander, for example they won’t give you a mortgage if you’ve had SEISS grants. In the most recent year, if my recollection is correct, they’ve again been shopping and changing their self-employed criteria for ages. They need quite a large deposit for self-employed people. The Barclays, I believe, are happy to lend with an SEISS grant as long as your turnover is equivalent to that profit figure. So it’s a bit of a pain, it’s time-consuming and it’s extremely important that people check what mortgages they can get and if they can get them before they start making offers on houses. You might be very confident, and rightly so, that you’re a dentist. Your earnings have been great. You earned even more this year because of the pandemic. Your earnings are boosted. But that doesn’t mean the bank wants to lend you money, and it’s not just because they don’t understand or believe you. Sometimes they don’t want any more self-employed mortgages on their book at a high-risk time, and it’s as simple as that. So they make it more difficult for self-employed to get mortgages to call their built-in volumes. That’s what we’ve been seeing.

Dr James: 

Really, really. So we’re far from bulletproof. Even though we’re on paper, we look like we’re doing well for ourselves.

Vinay: 

Yeah, banks have targets that they don’t want more than a certain percentage of their lending book to be self-employment or high risk types of loans. So if they start approaching more of that, especially at a time of heightened risk and volatility, they may reduce that percentage that they’re willing to accept. On self-employment I mean, santander at one point decided that they want 40% or more deposit from a self-employed applicant or don’t want to come into it. They literally just they were very clear we don’t really want self-employed business at the moment. But if you’ve got a huge deposit that negates our risk, we’ll take it on. But it’s a nightmare. It’s a nightmare. So things are getting better, don’t get me wrong. It is improving as time passes, but the improvements are slow but they’re not necessarily a straight line up. So you know it’s a bit of a let’s go back. We’ve had too much, too many Asians now when they get a bit more than it gets, you know. So it’s it’s volatile. Again the reason I say it’s important to speak with someone who knows self-employment specifically.

Dr James: 

Interesting. There’s nuance to it. There’s nuance. Do you know, when? I have these podcasts honestly, you just from the arts, like we were doing one on Taxi the other day, and every time I talk to someone it’s just like dentistry. I mean there’s a fill-in, there’s a white fill-in and then there’s a carved white fill-in with anatomy primary, secondary, tertiary anatomy. The occlusion is perfect, it’s all of those things. It’s just. It’s just never ceases to amaze me the depth of knowledge that there is in any single field and how you can. The more you know, the more you’re armed or equipped to go out there and just well, if you don’t know, you don’t know this stuff, you know and you’ll never be able to. You’ll never ever be just getting on favourable rates with your mortgage or with your money or your tax or anything. And it’s just my mind always models when I talk to you guys. It does.

Vinay: 

Well, this is. You know. I mean, what you guys need to learn is a hell of a lot more in volume and complexity than we do, but it’s that very reason that a lot of you guys don’t have the time to spend bringing all the different banks and finding out what your self-employed criteria you know. It’s just like I say at the moment, banks have made it particularly difficult for self-employed, which has happened to be what 95% of dentists, unfortunately. And when I say self-employment, I mean SoulTrader’s partnerships, limited company directors, all of the above.

Dr James: 

Interesting stuff. Vinay, let’s cut to the chase. You must get this question a hundred times a day, but I’m going to ask it anyway because that’s what everybody’s thinking. What are the surprises up with Don Don Shirley? I don’t know.

Vinay: 

I don’t know. I mean Stamp Beauty discounts pretty much ended. We’ve not seen a drop in prices. What I think will happen is you know the house that was advertised at 500,000, where people were offering 510, 525, 35, 540, 550, that person will still advertise their house for 500,000. They’ll either never sell it because they still think they’re going to get what they hoped they would have got from during the Stamp Beauty discount, or what will happen is they’ll soon realize that we’re not getting 20 viewings a week, we’re not getting loads of people knocking our door down to buy this place above asking price. We’ve got it up for half a million. Let’s drop the price. Well, let’s be willing to take off as below asking price instead of offers above, and I think that’s what’s going to happen. I think London has suffered central London due to the pandemic. You know whether those prices will recover and get back to the rate of increase they ever were before. I think most people would agree that the rate of escalation in prices in central London was ridiculous and way, way over what it should have been compared to anywhere else in the first place. I think some might see that as more of a correction than a drop in prices. How is that? In the countryside I’ve gardens. You know they’re doing particularly well or have done particularly well. I’m not sure what the market would be like this month, next month. I think there’s still a lot of motivation in certain areas for people to move up. I wouldn’t want to buying a flat unless I was getting it at below market value as an investment. If you live in it, that’s fine. It gives you a different value. But if you’re thinking that you’re going to buy something and the investment part of it is important to you whether it’s where you live but you want it to be a good investment as well or whether it’s a buy to let that you’re engaging in, think about it. Would you want to live in a flat right now If you could live in a small house, maybe 10, 15 minutes further away instead? And that’s the shift that I think is happening. So maybe certain things will, because we’ve had flats downvalued. People who have made offers agreed offers on flats. Value has gone out from the bank and downvalued it and said that’s not worth what they’re paying. We’ve had that a few times through the pandemic. Hasn’t happened at the house since I can remember.

Dr James: 

Okay, so again nuance to it. It’s not just as simple as up down sideways or the rest. Fair enough.

Vinay: 

It’s just supply and demand, isn’t it? Every house is within commutable distance of big towns are doing fantastically because people are selling their expensive city locations and cashing in on that and buying something much bigger a bit further out, because the people who were in the office five days a week might only be in the office two or three days a week. Now my cousin just moved out of London towards Potters Bar somewhere, sold their flat, bought a smaller house a small house because he only has to go into the office two days a week. Now I don’t mind standing on the tube for an extra half hour, 45 minutes two days a week. I’ll get a bigger house and I think that’s the shift that’s going to happen.

Dr James: 

Fair enough, and you know when we were talking earlier about this. Well, I suppose the fact that stamp duty is now returning somewhat or it’s creeping back in you’ll know the technical release more than me, I mean, to me it just seemed so from the outside. Looking in, it just seemed so bubbly not that long ago, and I suppose that the fate of houses are tied to the fate of the overall economy. So I suppose one to watch. And I know that there’s the people out there who are kind of like the perma bears in the constant fear mongers and doomsayers who say that we’re owed a good crash in the stock market, then we might expect houses to go with it. But who’s to say? Who really, really, really knows, who’s to say how coronavirus is going to pan out? No one really knows. Ultimately it’s all just speculations.

Vinay: 

This is the thing. None of us.

Dr James: 

Is there ever going to be a perfect time to buy?

Vinay: 

None of us thought we’d be here right now. No, it’s the thing. The other thing to consider this is just my theory of no idea, of not research. Whether any experts agree with me or not, it makes sense to me. You need a certain amount of deposit to buy a house. You need to save that money. Go back a couple of years before the pandemic and the stamp duty discount were like a year and a half. You needed not only the money to buy the house, but you also needed the stamp duty money. Buying a half million pound house. That’s 15 grand. Government says you don’t need to pay stamp duty anymore. Now it’s up to 50, 500,000. So everyone thinks, great, I’ve actually got enough to deposit to buy my house now. And so they then enter the market and that pushed the prices up. And now what’s going to happen is people are not in that position anymore and people who thought they saved 15 grand probably didn’t probably paid 30, 40 grand more for the house than they would have if there was no stamp due to discount. So, like I alluded to, you’ve had a bunch of buyers enter the market prematurely that might have waited 6 to 12 months to save or deposit To keep them by these houses. That’s been pushing the prices up. Those people are back in a situation where, if they’ve not already bought by the end of last month, they now have to have that stamp duty fund allocated again.

Dr James: 

Yeah.

Vinay: 

Which might mean, okay, well, we actually don’t have enough to buy anymore because part of that money has to go for stamp duty again and there’s going to be a little bit of a pullback in that respect. But then there’s also the flip side, where I’m probably not the best person to ask this to, because dentists have all done really well financially by and large. There are exceptions, I’m sad to see sometimes, but by and large you guys have tended to earn more as a result of the pandemic than otherwise. Patients aren’t going on holiday, they’re not going down the pub every Friday, saturday night and they’re wearing a mask so they can cover their mouth up if they have dental treatment, and it’s resulted in buoyancy in the dental sector. So a lot of our clients are buying not just because there’s a discount anymore, but because they’ve actually had a banging year and they’ve saved up a deposit because they thought they’re in buy now. And so I think I’m a bit less exposed to market trends, because pretty much all of our clients are dentists, whereas dentists don’t control property prices, and this is the problem is, it’s everyone else that does, and I don’t really deal with everyone else to see, oh crap, business has really slowed down after the stamp duty because I’m still seeing people do a fantastic amount, so you’re like a bubble within a bubble in a way.

Dr James: 

I suppose that’s a really good point. Actually, that’s interesting. I never thought about it like that.

Vinay: 

So dentistry has been doing well financially. That I can say by and large. Some people are, you know, unfortunate enough that they’ve not earned as much. But most people are seeing that even though they earn less because of the initial lockdown that period of time, they’ve actually earned so much more for the remaining months and the rally is continuing in that respect. Hopefully it will continue. The other thing you’ve got to remember is we’ve not seen the end of any COVID support funding nationally. We don’t know how skit people are going to be yet.

Dr James: 

Totally. I mean, that actually ties us into very nicely. What I wanted to ask next, and that was how do you see this panning out, or what do you think might? I know it’s obviously inherently hard to predict, but can you, is there any foreseeable changes for the future that you can enlighten us on, that you expect are going to happen, or just any more insight that you can give us today. I know that it’s possibly a hard question to answer but from us, because most people out here listening to this podcast will have very limited knowledge. So even just those tiny little bits and things that you might think seem obvious, that you know are changing in the near future, even that will be gold dust to us or anybody who’s listening.

Vinay: 

I mean the introduction of the new help to buy scheme, which again means you have a 5% deposit. But the rates are horrendous, and I always try and encourage dentists. The problem that we find sometimes with young dentists is you’ve been skint for a while, been a student, loads of stuff that you’ve either borrowed or a list of things that you want to do that you’ve not had a chance to do. Then you graduate, you get a job DF1, you’re earning okay. You become an associate, you earn well, but you don’t feel very well off because paying debts back or you’re buying the things that you wished you add the money to buy, you still don’t feel very flush. So then you think oh crap, it’s taking ages to save a deposit I need to buy. I mean I’ve only got 5% and I say but why don’t you save up another 5%? Oh, it took me ages to get here. You’ve been working a year, you’ve had to pay things back, you’ve had to do all the things that you wanted to do and now you’re accruing the savings. Now you’re actually going to start seeing the power of your earning potential because the money is going to be stacking up quicker. So a lot of dentists talk themselves early on in their career into feeling skint when they’re actually earning good money and then end up buying something far too prematurely. The social pressure in this country to get on the property ladder as soon as you can Asians. We have a problem with Asians because the Asian community is paying your debts off as quickly as you can. Don’t pay someone else’s rent by investing in it. Sometimes it’s better for someone to rent for a year so they can save and pay half the interest rate on their mortgage for the next 5, 10, 15 years. And that would put them if we look at where they’d be in 10 years from now. They’d have been further forward if they’d waited until they bought. But that seems absolutely illogical to the dentists. Who wants to buy now? But they think well, surely the sooner I buy, the further forward I’ll be in 10 years from now. And that’s something that, with rates as high as they are on the smaller deposit products right now, I think at the moment people should hang fire. Save up bigger deposits and then we’ll see. As time passes the banks will become more confident in lending at smaller deposits and the rates will improve. Rates are artificially high with smaller deposits because banks don’t want to lend you money if you’ve only got a 5% deposit and, like any dental treatment you do, you don’t want to do the dental treatment. You’ll just charge a price that makes it worth you. Putting up with that crap and that’s what banks are doing is like I don’t want these patients, but if you’re going to be knocking on my door 5, I’ll charge you this much and then it’s worth it for the hassle and that’s what they’re doing. You get back to a point in the future rates will come down, but by then in the future, you’ll have a bigger deposit and you’ll get an even better rate anyway. So that’s something that we’re seeing a lot of and that’s what I would recommend. I’m sorry I’m fluttering from one point to another, because I start saying something and then I make another point and then I start explaining that.

Dr James: 

No, I think this is all good, it’s all useful information. And then just to tail back on what you said earlier, it’s not just the 5% upfront that we have to contribute against us an unfavourable rate. Well, there’s a stamp duty, but then there’s the fact that we’re self-employed as well, which again kind of compounds the issue that the rates are unfavourable still.

Vinay: 

Is that correct. Rates are no different. If your rates are no different whether you’re employed or self-employed, it’s the qualification criteria to get that that’s different. So an employed person it’s a PAYE might get a times 5 income multiple or a 4.75, whereas a self-employed would only get 4.5, for example Right. A bank like, for example, santander still won’t. I don’t believe they’re giving minimal deposit mortgages to self-employed people, only to employed people. I believe Scottish widows have a loads of value cap In fact. No, they’re actually capping loads of values on all applicants because they’re backlogged usually. But it’s more difficult to get the mortgage you want if you’re self-employed. If you pass the entry requirements, you’ll get the same rate as everyone else.

Dr James: 

Ah, god would clear that up then it’s glad we cleared that up. Yeah, there was something else that you were just, I think I kind of well, I think I might have jumped in there is all when I asked that, because I think when we were floating a bit between those points, as you put it earlier, there was something you were just about to say to add in addition. Possibly, if it slipped your mind, it slipped your mind, it’s absolutely no problem, because I did sidetrack.

Vinay: 

If it was important, I’ll remember it. Fair enough, fair enough. So if it was important, I will remember it before we end this.

Dr James: 

Cool, fair enough. Well, actually, on that note, I believe that was everything we had on the agenda today, because the idea of this podcast, of course, was to complement the one that we did previously. So there’s quite a lot of knowledge that we’ve imparted on that one that, while states are good, it would be easier to hear it, I suppose, directly from that episode for anybody who’s curious or has a question, if anybody who’s curious or hasn’t listened to it already, because I think what we’ve given out today, we could probably draw a line under that, and that would be a useful episode in itself. Unless you have any parting words for me or anything else that you like to chuck on top, feel free.

Vinay: 

A general point. I’m pretty sure that they would have been in the last podcast, but not everyone’s going to listen to what you say and listen to both of them.

Dr James: 

Yeah, let’s have a refresher.

Vinay: 

Credit history, the entry requirement, the minimum height requirement as such to get a mortgage, if you’ve got a fork credit history, it doesn’t matter how much you earn, how much deposit you’ve got, bank isn’t going to want to give you a mortgage. We have the exception of oh, I’ve got a CCJ for 50 quid because I moved out of my last address and my final bill. They didn’t send it to me and first I heard about it was on the bailiff’s tender, but I paid it as soon as I knew about it, things like that. We’re not talking about accidents. We’re talking about giving you in carelessness, not paying your bills on time. Keep on top of all of your bills. Never, ever, have a credit card set that you have to pay minimum payments up at the very least and then make the extra payments every month yourself. That way you’ll never be late on a credit card payment. You guys move around a lot in your early years. If you’re in a dental school then you might move around a bit for the first few years before you settle. Always make sure you’re on the electoral roll at the address that you are living at when you apply for a mortgage. So if you’re renting a place but you’ve got all of the bills in it. You’ve got the money down. That’s a tout. That’s going to be a problem. Bank statements need to be at the address you’re living at. It needs to be on the electoral roll at the address you’re living at, because all of that ties in to a credit score and you’re addressing ID verification. You’ve had people who have had to miss out on properties because it took them too long to get on the electoral roll and the bank wouldn’t agree the mortgage because their score was just marginally too low and it was because they were not on the electoral roll. It can take six weeks to get that updated, which, if a vendor is in a property boom, not going to wait for you. So get all of your ducks in a row. Make sure that dentists are practical people. They don’t like admin and paperwork and these are admin and paperwork matters. They’re things that naturally, you know what enjoy is doing, but you need to do them. You need to get things to be right if you’re gonna buy a house. What else? What else, what else? I think that’s. I’m just thinking of the most common obstacles we come across during mortgage applications Accountants. So this is a documents from account, one thing that seems to cause delays more often than anything else is you have an SA302, which an equivalent document is a tax calculation summary. If you look at the end of your fully filed tax return, there’s three or four white colored pages and that’s called a tax calculation summary. That’s the modern equivalent of an SA302 contains the same information. So from if I say SA302, we can assume I mean either of those documents. Then you have something called a tax year overview. No one really knows about this, it just seems to be a totally unknown document. You have to log on to your HMRC portal and generate a tax year overview. Tax year overview states your tax liability for that year. Your tax return states the tax liability for the year. Those two figures should be exactly the same. We’ve had issues where the accountant made a correction and then didn’t issue a new SA302 or tax calculation document, or old documents have been provided and there’s always a nightmare in trying to get to the bottom of this and we just end up spending so much time communicating with accountants back and forth with the bank. It’s fine, it’s part of what we do, but the problem is, the more we do it, the slower it makes the process for everyone, because these things take time. Get things like that in order early on. Make sure that the number for your tax liability on your tax return has a matching figure to the penny on your tax year overview. So that’s something that causes delays far more often than I’d like. Other than that, I think it’s pretty straightforward. We have most of it with income. Most banks look at two years of your figures. They’ll average the two If the income is increasing. If the income has gone down, they’ll take the most recent year in isolation. If you’re a limited company director, a lot of banks will use your salary and dividend, but some banks will also will alternatively look at your salary and profit. So there’s a lot of dentists out there under the false impression that they need to bump up dividends in order to get a big mortgage. But that just means they’re costing themselves an awful lot of money in tax for no good reason. I think that that’s pretty much all of the important things. I’d like to say a little something about ByteLabs, but I don’t if you might want to save that for another time. But it’s up to you. All top tips If you want me to carry on.

Dr James: 

All top tips, that’s all top stuff. Good advice and thank you for that. And yeah, feel free if there’s something that you think is relevant or will be helpful to anybody who’s listening on ByteLabs, and we are all ears.

Vinay: 

So there has been opinion of. Everyone has a different opinion. Not everyone invests in the same way. James, I’m far too cautious to getting crypto currency. I tried a few grand a few years ago because I never wanted that FOMO of our cap. I wish I had. But that’s me done. It’s too high a risk. I don’t mess around with Forex and all the stuff Ritesh does way, way above my head. I’ve no interest in it. So everyone has a different strategy from what works. I would just say do your own research and double check the facts relayed to you by people giving advice. It has been highlighted that ByteLab is not a good investment anymore. I think that’s a very naive comment to make in a very misleading one. How can anyone possibly say it is not a good investment when you’ve got people making a phenomenal amount of money from it? There is tax. There’s not tax relief anymore, it’s a tax credit. So it just has become even more important to speak with a mortgage broker who knows what they’re talking about than ever before when it comes to investing in property, because what you’ve got is used to get full tax relief against mortgage interest, right. So you understand what I mean by that, james Tax relief against mortgage interest.

Dr James: 

So it means your mortgage interest is tax deductible. So, as in what you get paid in your income tax. It’s reduced by whatever your interest is on your mortgage. Is that correct, yeah?

Vinay: 

so the easiest way to and I explain this to people who don’t quite get it is you understand that your indemnity insurance as a dentist is fully tax deductible, right, yes? And you understand the impact that has to your tax and your profit figure? Yeah, exactly the same as mortgage interest used to be on Byte Letts? Yeah, right, so the interest on your mortgage was fully tax deductible. What happened afterwards is I’ll correct myself in a minute, but it will just be easier to do it this way you now get basic rate tax relief on mortgage interest. So if you’re only a basic rate tax payer, that’s fine. But if you’re a higher rate tax payer, effectively what’s happening is it’s like if your accountant says from now on you can only tax deduct 50% of your indemnity insurance, that’s effectively the outcome. I see you can now only get basic rate tax relief, which, if you’re a higher rate tax payer, it’s 50%. If you’re an extra rate tax payer, obviously it’s a bit worse than that, but there are ways around this. But the correction I wanna make is it’s no longer tax relief, it’s a tax credit. So what happens is it can increase your tax rate. So let’s say you earned 40 grand, which is basic rate tax payer. Your profit on your property with zero tax relief bumps up your profit for your tax figure, so that could push you into a higher rate tax bracket and then you get a credit back at half of that. So what it means is, if you have investment income from other sources, you could end up paying a higher rate of tax on that as a result of having buy to let profit in the current format. Now I’m probably not explaining this as well as I could, but this is something that is a very, very good reason why you need both an advisor who understands mortgages and a good accountant to compliment that, because what we do is we’ll look at your mortgage. So the way to mitigate this to a degree is buy a property in a limited company, buy to let in a limited company. So you set up a special purposes vehicle, an SPV. It’s a limited company specifically for property. You borrow the money in the limited company and the property is owed by the limited company. Then you get full tax relief on mortgage requests because you’re then running a business. The limited company gets tax relief. The profits attacks the corporation rates there are also. Now this is where your accountant needs to be involved, so I’m gonna be a bit careful of how I say this, but there are company structures for people who want to invest in property. If you have a limited company for your dentistry, there could be an alternative, a slightly more interesting company structure, where you can do intercompany dividend transfers that are tax-free, so the money you accrue from dentistry can be moved to a limited company to buy property with in a tax-efficient manner. As opposed to drawing the money as a dividend and then paying tax on it and then using that money to buy a property, you can take the money straight as an intercompany dividend. Now, I’m not a tax advisor, I’m not an accountant, I’m not qualified, so this is my interpretation of it. You need to get individual advice, but what we do is, if someone wants to buy a property, we’ll look at the interest rates. The buy-to-let on limited company are higher rates with higher fees, but you get higher mitigation of expenses and lower tax. So what you need to do is look at the two separate options. Look at your future plan as well, because you know what you’re earning in 10 years time is not going to be the same as you’re earning now. You need to plan ahead for an exit strategy. There’s no point in you racking up loads of buy-to-let properties in your personal name and then thinking what the hell do I do with these later. You know you start you’re earning over 100 grand all of a sudden and then you start losing your tax-free allowance because you’re earning over 100 grand. Then you pay 45% tax at some point in the future. So if you have a limited company, you can bounce money between companies, provided you get the correct accounting advice. So really there are still ways to be really profitable in buy-to-let. And what I would say is if anyone relays their understanding of how taxation works in buy-to-let, run that. Pass your accountant before you take that advice from someone telling you not to get a buy-to-let, because I’ve heard some less than correct calculations and statements being bandied about that are just false. They’re wrong. The numbers don’t add up. You know 2 plus 2 equals 22 sort of maths. It’s not correct, which may lead the listener to believe that. Oh yeah, that’s a really crap investment. I mean, I remember seeing somewhere someone saying that effectively, you have a mortgage costing a few hundred pounds a month and rent costing a grand. No, I remember they used the capital repayment mortgage as an example of the monthly payments and then highlighted how the rent barely covers the mortgage and after they’ve paid tax, they’ve made it make a loss. But that person used the capital repayment mortgage as an example. That’s not the cost of borrowing, that’s the cost of paying the capital off on the principal loan. So if you’re going to compare and use that example, what you need to do is look at the interest payments on that loan, which would be a fraction of the cost that person states, and then you can see that you’re actually making a pretty hefty rental profit at that point and then, after tax, you’ve made a loss. I don’t think so. I’m not saying property is the best investment in the world. I’ve been the first on dentists, for dentists and groups where people have asked about pensions and other people have said forget your pension, put it in property. And I’ve been the first to say, really, are you going to make that much money from putting a few hundred pounds a month into a property portfolio compared to your NHS pension? I’m not a pension advisor, by the way, but I’m the first to say to people it’s not always as rosy as it seems and a lot of the people who are saying yeah, you can get rich from buy to let. They bought property half the price quarter of the price they are now. So they got rich. We can’t, but you can still create wealth If you do it well. You can create a residual income and, let’s face it, I think that’s becoming ever more important in dentistry. If you can create a residual income and cut down your dentistry days, you can take control of your dentistry. You can practice where you like, how you like, with whom you like, as opposed to having to practice to pay the bills. You can take control of your life again, and that’s what property can do. But also, don’t be under the illusion. You can have a 2030 property portfolio that’s passive, because people who are in that position will tell you it’s not passive. You do need to put hours and work into it. But to give you an idea, I’m far from a fool. I think People may argue with that, but I’ve done OK and my plan is at some point in the future and I’ve restructured my company recently. As a result is I want to buy a cheap buy-to-let property every couple of years Something cheap. I’m from Leicester originally. I’ve got a friend who runs a letting agent in Leicester who deals with low-rent properties, small terrorist houses, that kind of thing, perfect demographic for me, good rental yields on those types of properties in an area like Leicester where rental is high, and demanding areas with a lot of it, the first generation Indian immigrants, that kind of thing and I think that that’s a great way of me building a secondary residual income line that at some point, will be bringing me enough per month in that I will actually have a change of life as a result of it. Your mortgage bills and lifestyle can be paid for by something else. So what you’re working for is the extra stuff that you want to buy that’s nice and the lifestyle you want to build for your retirement. That’s when you have control over your life and that’s what a lot of people fail to recognize. When it comes to investing, you’re not just trying to make money. What do you want to do? Do you want to retire early or do you want to cut back your working hours? Do you want to be a multimillionaire and buy a brand new McLaren every year, or do you want to have enough money in the bank and a decent car that’s paid for on the drive and a couple of holidays a year, but only work four days a week Because that’s what you want spend more time with your partner and your children and I think for someone to make a statement as bold as investing in Byterlet isn’t worth it anymore. So it’s not accurate. It just means you need to get advice from someone who knows what they’re talking about and understands that sector, as opposed to someone trying to divert you away from it. But it’s a complex area that deserves its own podcast, james, so I just wanted to touch on that to highlight and maybe correct things. I’ve seen that may have been said that I wasn’t too. You didn’t agree with that. That’s fair. That’s completely fair.

Dr James: 

Well, I think that you make some good points and you know what we’re all about having as much input and opinion and information as possible. And you’re quite right With investing. It’s very difficult to make sweeping statements pretty much about any fast out of it Because, after all, it’s the shoe that fits for you as an individual, as an investor as well, and you invest in what you know ultimately and what you believe in. That is a huge part of it too. So thanks for raising that and very interesting and, yeah, fair enough, more nuance to it than perhaps game over for Byterlet, as some would espouse. And Vinay, there was something that you were telling me about off-camera which may be of interest to some of the listeners today. It was about your a new business venture that you’ve undertaken which helps dentists get better deals on their gas electricity for their practices. Have I understood that correctly?

Vinay: 

That’s right. Yeah, so commercial utility broke. So if you own a practice, you’ll have probably had annoying sales calls that your receptionist would have told you about, from salespeople trying to get you to switch over your gas, electric or even your car payment services. And we’ve got a lot of clients who own dental practices. So I wanted to offer a service that wasn’t salesy. Is it good company, is it not? Are they saying, if they’ve been honest, are they not? So I partnered up with a guy who’s been in the energy sector for 10 plus years. So this isn’t a referral service. We’re not just introducing you to another company and then getting a kickback for it. This is my and Rob’s company. We’ve set the company up between the two of us Rob’s industry expertise so we can help negotiate your rates for your gas, electric water. We can provide card payment terminals and card merchant services. We’ve had quite a bit of success. We’ve only launched about two months ago, but we’ve signed up a couple of dozen dental practices already on various services, you know, from the commercial utilities to the card payment. So I just wanted to ask if any of you guys may be interested and think this would be relevant. Would you please check us out on the website and drop me a line if it’s something that you might be interested in. Would you mind if I gave the web address, james?

Dr James: 

Far. Away.

Vinay: 

Vinay, yeah, it is vr-energycouk.

Dr James: 

Awesome. Thank you for that, Vinay. Can I just say thank you so much for coming on this podcast.

Vinay: 

My pleasure mate, as always.

Dr James: 

My pleasure to have you, my friend. Lots of information, dish light, as usual. I’ve learned a lot. Hopefully, everybody who is listening has learned loads too. Just quickly before we wrap up, I just wanted to say one thing super quick For anybody who is listening to this podcast and is not aware of the Facebook group which it was spawned from Dentist who Invest Community Group for Dentist who Enjoy Trading. Feel free to hit that up. Give that a check. Check out on Facebook. This is the group that has inspired this podcast, this podcast which is designed to improve financial literacy in the dental world, Encourage people to think about how they can make their money work for them, and we release podcasts every single week which are broadcast beforehand on the group. So you have an opportunity to answer some questions. So feel free to hit that up if it sounds like your thing. Vinay is on there, Vinay, with thought. If anything that Vinay said today sounded of interest to you or you’d like to explore further, feel free to hit them up. He’s always answering questions on that group and I’m sure he will be happy to help Vinay.

Vinay: 

Yeah of course.

Dr James: 

Of course you will. Of course I’m sure you will, vinay. Thank you so much once again. Anything you’d like to say in conclusion, before we wrap this up today?

Vinay: 

Thank you for again inviting me on. You know certainly a privilege to be able to have an audience as large as the people on have subscribed to your podcast. It’s doing fantastically. Thank you so well done. Keep up the good work. You know you’ve got something really, really special going here, so I’m happy for you, mate.

Dr James: 

Thanks, man. It means a lot. It means a lot. Okay, guys, we’re going to wrap up today. As I said earlier, Vinay, it’s been an absolute pleasure to have you. We shall let you get off, enjoy your evening. We shall speak again very, very soon. See you later.

Speaker 2: 

Thanks for watching. I’m Vinay. I’m a big fan of your podcast. Looking forward to seeing you on there.