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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 to the Dennis who Invest podcast. Lovely Good evening everybody. Welcome to our mortgage masterclass with well-known face from the group, Vennay Rathod Vennay, how are you this evening? Very, very good to have you once more on the group. How are things how?

Vinay: 

are you? My day? First day back after a four-day weekend is always a bit hectic, I can’t complain. I’m a mortgage broker in a property boom, so I’m smiling.

Dr James: 

Good stuff, my friend, here to offer your endless bonds of expertise. Once more on the Dennis who Invest group, we are going to throw the mic out to the floor. Anybody who is watching this please feel free to throw your questions in the chat and we will get to you ASAP. That goes for everybody who’s watching on the Dennis who Invest group as well. Just while we’re waiting for those questions to come in Vennay, I’m going to ask you a question you probably hear about 50 million times a day. Good time. Or bad time to buy a house. What is your take on that at the moment?

Vinay: 

Are we talking to live in or to invest in?

Dr James: 

like a rental.

Vinay: 

Because I think the answer may be slightly different.

Dr James: 

Let’s go first time buyer to live in for the moment.

Vinay: 

An interesting question. I dare say the sooner you can buy, the better, might be the view that a lot of people put out there. I mean, look, I say buy a place when you find a place you want to live in. And buy a place because your mum and dad and all of your friends and people are saying that you’re at that age or point in your career where you should own your own home. That’s nonsense. Renting is absolutely fine if it means you can wait to get in the house that you want to buy, because buying a place you want a little later is going to save you money versus buying it in two steps because of the stamp duty. That’s the biggest one is the stamp duty. So I always tell people dentists who are quite young, have only been working for a year and they want to buy a place, and they’re talking about shared ownership or help to buy or 5% deposit and squeezing in, and they said, but we’ll move in a couple of years. And I said, well, why not wait six, seven, eight months and then buy the place you want? Instead, just rent? Oh, but I’m throwing money away and rent, it’s just paying someone else’s mortgage off. I’m like, yeah, but you’re going to end up in a place you don’t want, that you’ll eventually want to sell and move and that will cost you 10, 15,000 that you’ve lost out by doing it in two steps. So when you feel the time is right is really the right answer. Don’t rush to get a place because people have told you the time is right and that you need to make it happen no matter what. And it’s bound to be okay, because the sooner I buy a house, the better it must be. That’s not always the case, because if you can buy a house you want instead of one, that’s almost what you want. Just wait. That’s the answer. For my opinion on residential Bytele is different, because there’s always a good and a bad time to buy Bytele. It depends on what you’re buying. There’s good properties out there now that are great investments. The properties out there that are terrible investments that will never be a good time to buy. So it depends on the deal on the Bytele genuinely.

Dr James: 

Yeah, so it gets a lot more nuanced at that point. Well, the conventional wisdom is now this has always been a theme that’s been recurring over a number of years, many decades that if you can purchase a house, the house appreciates at a rate that’s greater than the interest rate will cause the value of the debt that you’ve borrowed to increase. Then what that would mean is that you’ve made a gain on the house, of course, but you’re saying we’ve got to temper that from the perspective that obviously you’ve got all these other fees, like lawyer’s fees, and what have you when you do purchase a house?

Vinay: 

Remove all this time out of work to moon. Also, the extra stamp duty because you’re only a first time buyer once. If you’re buying anything at 500 grand or below, you will save money on your stamp duty as a first time buyer. So if you buy a 200 grand place now and then you want to buy a 500 grand place a year later, that will have cost you. But the other thing is look at the house you’re buying. If you’re buying a new build, are you going to make any money on it in a year? James, if you buy a house that’s 50 years old, ran down, decor and for five grand, 10 grand, you can go in and put in paint the walls, put in new fittings and have a place that looks brand new, you’ll have made loads of money on that. But that isn’t because the property price has gone up. It’s because of what you’ve done. How much of property price has gone up by year on year. Take away this two-year boom. I dare say that the stamp duty would be a bigger. The other thing is, if a house goes up in value by 10 grand, you can borrow 85-90% of that increase. But you can’t borrow the money to pay your stamp duty. You have to pay that cash up from both times. What you’ll find is when I run through the timeline with a lot of people, dentist year out of the uni wants to buy a new build with a 5% deposit or help to buy scheme or shared ownership, which is where you rent part of the property and you buy part of it with the mortgage. If people are not aware, I say to people if you just wait, in a few more months you can buy all of your own place. You make all of the money on the increase in the property value instead of the help to buy where the government gets some of the growth in your equity. The other thing is it depends on what you’re buying as well. James, you’ve got someone who could be buying a 500-gram property. 600 is their first property and the next property would be a million. That’s two big chunks of stamp duty. Sometimes these people find that they’re in a position to do that a lot quicker than they thought. A bit of psychology in that answer as well. If I can expand.

Dr James: 

Of course, let’s hear more. You know what? Can I just quickly jump in? That’s interesting. What a brilliant take, because obviously the conventional wisdom is that you just buy as soon as you can. But you’re saying we’ve got a temp of this with all these other factors that aren’t so often talked about. Let’s hear more about the psychology.

Vinay: 

It may indeed be the right thing for you is to buy as soon as you can, but you need to have that advice personally, not award me. The psychology part of it is I’m talking about dentists specifically, because that’s all I work with. I don’t know other people may act the same or differently. You go through five years at dental school, most of you and the most. If you don’t have enough money to do what you want while you’re at dental school, you then do a year as DF1. You get a good wage I believe it’s the highest graduate salary that there is but it’s still. You think, yeah, but I made a graduate a year early years on 80 grand. He’s driving an M3 or whatever Crap. That’s not much. Then you get to a year one or year two of earning your 70, 80, 90, whatever £1,000. I always get people who still tell me no, it’s not that much money. I’m still skinned, I don’t have enough. And I like to remind people that you’ve just spent the last year catching up on all of the things you’ve wanted to do. For the last 10 You’ve been buying the stuff you’ve not been able to afford, going to the places You’ve not been able to afford to go doing the things you’ve not been able to afford to do and Of course, you’re gonna feel skin. You’re on 80 90 hundred grand a year. How are you skin? You’re not skin, you’re just catching up on life. Yeah, and once you’ve got all that of your system, the money will build a lot quicker. Because you guys think I’ve been working for a year, 18 months, and I’ve only saved 20 grand, 10 grand. It’ll take me another two years, five years, to save another 60, 50 grand. No, because you bought a new car, bought new clothes, you upgraded everything that was old. You know You’re earning 80 grand a year now. You deserve it. You’ve come and bought nice stuff and done nice things, but you’re not going to carry on doing that forever. So now your money is building up because you’re, your living expenses are fixed. You bought all your nice stuff, got it out of your system and now you’re left with your regular recurring bills and every penny you earn above that, after tax is disposable. That goes straight into your savings pot. And After you’ve got past that initial little catching up on social and material objects, your money would stack up really quickly and that’s why a lot of dentists who are young don’t feel as though they’re earning great money, even though on paper they’re earning great money. It’s because of things and people think Our car or big purchase? You know, like you I don’t know, I don’t buy many overly expensive things for what kind of things to people, but have spent their expensive shoes and handbags designer ones and holidays and business class flights and all of that stuff. You know you don’t do them constantly and these things add up. But also what adds up and you know a lot of people don’t realize the little things that you’ve bought that you’ve not had. You know people furnish houses and they tally up the cost of sofas and beds and stuff. They don’t tally up the cost of forks and knives and that the thing to peel your potatoes with, and all that, because those are the things that add up to thousands by the time you’ve tallyed all of the little things up. So People overspend a lot more than they believe, especially soon after qualifying Totally bang on like no, no, I love it.

Dr James: 

No, totally, I’m actually. That’s a really good thing to point out, because I Could see myself in your words and I wasn’t even aware I was doing that when I got out of uni. It was like I was taking five years of spending and concentrating it into about six months to compensate, you know, because I felt like I’d been doing that graft the whole time and that is oh. Totally bang on, totally bang on, and it wasn’t even aware that I was doing it. So, yeah, very valid point. Guys, we’ve got some questions coming in. Now in Keep them coming, everybody. I will go ahead and answer this one that is kept in on the zoom chat, first of all, and I can’t see them, by the way, am I?

Vinay: 

am I supposed to be seeing the questions or are you supposed to be telling me? I don’t know my supposed to say anything you will see them on occasion.

Dr James: 

This is a direct message, so it’s a private message. I got you. There are someone Facebook as well, but what I’ll do is I’ll be the host for the most and I’ll relay the questions to you. Vinay, awesome, yep. So First question we’ve got coming in. I’m gonna assume this person wishes to remain anonymous, hence why they messaged me directly. So we will, we will, we will bear that in mind when we’re speaking and we’ll make everything anonymized. Is there a way, vinay? Is there a way to get a mortgage without being self-employed for two years? Oh, this, this oil chest? Not, there is, isn’t there? Is there a way to get a? Loads of ways, one of the most. Hang on, sorry, I just jumped the time, buddy you. Second part to that question. I have been working for 18 months and I’m keen on securing a mortgage as soon as I can. Just just to relay the whole question, just a recap Is there a way to get a mortgage without being self-employed for two years? I’ve only been working 15 months. I’m keen on securing a mortgage as soon as Vinay. Over to you.

Vinay: 

Yeah, okay. So it’s one of those prominent things we we advertise, actually, as we can get mortgages for dentists who don’t have accounts at all, let alone two years. We’ve got a number of lenders that will give a mortgage based on the face value of a UDA contract. If you’re NHS in England and Wales, brilliant that. If you’re private, then there are still ways. Sometimes it may mean you need to be in the job for a few months to show some established earnings If you replace the dentist and we can get a reference from the practice owner To say that this is the level of income we expect Dr X to generate having replaced DrY. You know we can get that Considered as well. But the it does have some limitations, like, for example, I can’t get a help to buy mortgage based on a projection. Actually, no, I lie, I can in one very specific scenarios. If your UDA value adds up to over 75 grand, then there is one lender who’ll do that. But Otherwise, in general, if you want a large mortgage, we need a decent deposit size. So 15, 20% upwards Much smaller mortgages can be easier to obtain. But obviously that’s more relevant for up north, where you know if you’re You’re buying a place around 15 200,000, then it’s the requirements are much easier because everyone knows the dentist and good money. So if you’re buying a house that we know everyone whose dentist could afford, they’re not going to need to check as much. But if you want to buy a Million-pound house and have a six, seven hundred pound grand mortgage based on projected earnings, then you know you’re probably going to need a 20% deposit upwards. But the the short answer to that is yes. If you’ve been a dentist for 18 months as self-employed 18 months rather then at the very worst I can likely get your mortgage based on your last 12 months. If you can get an accountant to just do Based on last 12 months, dr X, profit has been X.

Dr James: 

Totally. It’s an old chestnut, that one, and actually it was something that I Thought as well before I started talking to you, vinay, because I went to a large high street bank who shall not be named, interested in obtaining a mortgage, once upon a once upon a blue moon a while ago, and they said the same thing. They said no, it needs to be two years, and I just took that as God’s word. Basically, I just thought, everywhere it was like that. So yeah, absolutely golden nugget of information right there. That’s not necessarily the case. It just means your mortgage has to be a little bit more bespoke and you, as you’ve already said the provider, will take into account UDAs etc. The the more bespoke tailored advisors, so awesome. Next question I’ve seen something pop up here now.

Vinay: 

Oh, I Do a little bubble.

Dr James: 

Ah, that one see that as well. I I think that might mean that someone sent you a direct message for me, but I have a few. Yeah, so to ever. That individual is being free to message me the questions and then I’ll relay them to Vinay, because I’m unsure of an is able to see them properly at his end whilst he’s speaking. So whoever that is, please pass it on to me, vinay. While we’re waiting for that one, I’ve had another one come through, so I’ll go ahead and read that Again. Anonymous question. Would you recommend against doing a joint mortgage with a partner to increase affordability? Does it affect stamp duty? You pay as a first-time buyer? Real quick guys. I’ve put together a special report for dentists entitled the seven costly and potentially disastrous mistakes the 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 wwwdentistunevestcom 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. I’m really looking forward to hearing your thoughts.

Vinay: 

That’s a very broad question. I’ll answer the stamp duty part of it first. I mean, if one of you is a first-time buyer and the other isn’t and you buy jointly, you it will be looked at. How do I put it? The worst outcome for you is what the HMRC will usually be a set along. Married couples are classed as a single unit. So even if they’re not jointly on the mortgage, if your other half has a property or has owned a property, that will impact your stamp duty. So if you’re legally married you are a single unit, even if they’re not jointly on the mortgage. But if you’re set, if you’re not married and it’s a partner, if you take a mortgage jointly, then it is the most expensive version of the outcome is likely to be the correct one. So if one of you owns a property already, there will be an extra 3% stamp duty. This is England and Wales. Obviously Scotland is slightly different, but broadly speaking there will be the additional rate of stamp duty to pay. But if you’re both first-time buyers, then you’re both first-time buyers, then you get the property on the basis of a first-time buyer. But it sounds like that might be a two-part question. James, are they talking about disadvantages of I don’t know what. If you break up afterwards, that can be a problem. It’s a partner depends on how much of a partner they are. Wouldn’t want to buy a house jointly with someone I met on Tinder last week, I suppose.

Dr James: 

Did I ever tell you about that for 10 years? That kind of reminds me of a story From Tinder. I’m kidding. Okay, so were you finished there for now?

Vinay: 

Well, yeah, I mean they can expand on that question if they want, but I think I’ve covered that. But disadvantages of buying with a partner presumably they’re talking about a life partner, not a business partner. Buying rental properties with friends or business partners can be a little bit risky because very often even I see this mostly with family who own properties together Someone wants to sell to cash out, someone else doesn’t.

Dr James: 

Awesome. Okay, thank you for that for now. So to that anonymous individual if you’re able to offer us more information, we can go into the specifics. Hopefully that will have been enough in itself to answer your question, but feel free to direct message me Should that be the case that you want some more information. Okay, so we’re going to skip from the Zoom questions over to the Facebook live questions because they are coming thick and fast. So let’s go ahead and look at the first one of those, vinay, and that’s from Shaji Memon. Shout out to Shaji. Some time ago I read a news article saying doctors slash, dentists slash accountants can get seven times annual income mortgage. Is that true?

Vinay: 

So this is referring to the Habito mortgage. So Habito are a mortgage broker, online mortgage broker. They launched a mortgage product which is backed by, I believe, another bank. But in very certain limited scenarios you can get a time seven. I believe it is a lifetime fixed mortgage, a ridiculous rate. I mean, you see, the thing is dentists don’t really have the same sort of incremental increase in income that doctors do. You’re a third, fourth year dentist. Why do you want to borrow seven times your income? Probably you’re over stretching it, unless there’s a good reason that my tax returns show lower profits, because I’ve been on courses and I’ve only been working three days and I’m now working five, so my tax returns don’t reflect what I’m actually earning. But really, times seven. I can get times six, that’s not an issue. I can get times five and a half with a number of lenders, but Habitos times seven is if you go, now that you know who it’s with, you can Google them and literally type in Habito times seven mortgage. Then you’ll take it to their website and you can see all of the TNCs, what you need to qualify for sent mortgage. I’m pretty confident they will have a very strict requirement for two years of self-employment for a start, and the rates are horrendous. I just why would you want to pay so much for a mortgage when rates are so low at the moment, just for the sake of borrowing that little bit of extra money? I dare say, might it be easier to speak to loved ones? The amount of money you’ll save in interest over the next five years will pay a chunk of that money back. Speak to loved ones, see if you can borrow some money. Some lenders will let you borrow money on loan to use towards the deposit on the actual mortgage you’re buying, that you’re taking. So then you can look at taking another loan for that extra money. There’s better ways, I think, than locking in, because times seven is inevitably going to be a very expensive property that you’re buying, big mortgage. So we’re going to have like a 700, 900,000 mortgage at 4% or 5% when you could have it at 2%, 2.5%. But why not just wait? There’s a marshmallow test James. Give the kid a marshmallow and say you can eat it now or I’ll leave it as it is and I’ll come back at the end of the day and give you two of them. It’s like yeah, you can still afford your big house, you probably just have to wait a bit longer. I genuinely like a doctor. They start off on 26 grand, I think, and that consultant I think they get up to a basic of, I think, 74, 76 plus uplifts. It takes them eight years to get to what you guys earn in your first year as associates. So fair enough, if you’re a doctor, you want to get times seven, knowing that in two, three years I’ll be a consultant and my pay will go up by 20, 30 grand. That’s what it’s designed for. And I honestly think that the people who are doing the research at these banks to try and figure out how dentistry works, they look at your pay scales in hospitals. They think your earnings work in the same way as doctors do and that’s why they’re offering the times seven. They’ve got no idea that you guys peak a lot sooner than most occupations and then stay high and steady. They think that, like there are other occupations that you incrementally increase over the first 10, 12 years of your career, which is not necessarily true for self-employed dentists, I think. So, yeah, there we go. There it is. You can look it up online and see the rates. They’re not brilliant. I mean Habita or an intermediary lender we can arrange mortgages through Habita. I haven’t even bothered registering with them because I’m not. I just wouldn’t be comfortable. The rates that they’re at and the exposure they give or they put on the individual I’ll let someone else set that up and deal with the mess when it comes. I think it’s a bit risky. I was around when the subprime mortgage sector tanked and it is things like this that are starting to get a bit close. And yeah, it might help people get some houses and some of them might be absolutely fine there. But then there might be that one client who loses their home because they took too much on or it gives them a bit too much stress, and I don’t want to contribute to that, you know tough stuff.

Dr James: 

Thank you for that answer, Shaji. Shout out to you my friend. Hope you got what you wanted for from that. From what Vinay said, On to the next question. That comes thick and fast. We have Ashish Shah. Good evening Ashish. Good to have you on the show. Hi Ashish says, hi Vinay, what’s your opinion on releasing equity when remortgaging your residential home to place a deposit on a body let property? I suppose it’s fine as long as you can afford your monthly repayments on the new residential mortgage.

Vinay: 

Answer your own question there, dude. It’s literally as simple as that. What do I think about it? Yeah, again, it goes down to one of the first questions you asked, James Is it the right time to buy property or not? If it’s what you’re buying afterwards with that money, that is going to make it a good or bad idea. Raising the money yourself up by remortgaging to put into rental is fine. It’s one of the few or only investment reasons a bank will let you raise money on your home to fund. You tell them you want to put it in the stock market or buy a dental practice with it. They’re going to say no. You tell them you’re going to use it to buy rental properties. They’ll be happy, as long as you can afford it and there’s equity in your home to do it.

Dr James: 

Short and sweet. There. We have it On to Hitesh Gohil. Good evening, hitesh. Any tips? I don’t know if this is quite your remit, vinay, but I’m going to say this anyway. Any tips on buying a practice, goodwill, fixtures and fittings, time it takes to get a return on your investment, vinay.

Vinay: 

We don’t do commercial. Sorry, we’ve not done commercial for a few years. We recommend a good dental commercial broker who can probably answer that question for you. But yeah, that’s not on my area. It’s been a number of years since I did any commercial lending so I would not want to answer that. I don’t know the answer.

Dr James: 

Yeah, no, fair enough. It’s not a bad question, hitesh. It might be better placed with one of the live Q&As that we do from time to time with Andrew Acton. That is more his realm. He’ll be able to answer that.

Vinay: 

Yeah, that is definitely be able to answer that 100%.

Dr James: 

I’m sure you’ll have a brilliant answer on that one. So that is more his realm, hitesh, but thank you nonetheless for your question. My friend, and then that will be alive that we will arrange at some point in the future. 100%, and, hitesh, you will be able to get all the knowledge you need from that webinar. Let’s go on to the next question. I’m just scrolling down here Absolutely loads of comments. Drew says Vinay, are you highly recommended?

Vinay: 

Not as highly, as you Drew.

Dr James: 

Next question what we got here, drew says. I don’t know if I missed all the questions here because there’s so many comments, but thank you for all of these everyone. How would you decide whether to go on a long-term fixed or variable mortgage? Okay, this is good. Actually, based on the current historically low interest rates, this is a good question.

Vinay: 

How would you decide whether to go for a long-term fixed or variable? Have I remembered that correctly?

Dr James: 

Yeah, how would you decide that? Long-term fixed or variable Yep. And then Drew says, bearing in mind, obviously, at the moment interest rates are record low. So as suppose what Drew is saying is do you expect them to go up? Stay where they are, and how would that weigh on your decision to get a fixed or variable mortgage?

Vinay: 

I mean variable mortgage is a few of our between. I mean, I’ve been looking at variable mortgages for clients alongside fixed and they’re not competitive. Some of the variable rates are not great at all. If you can get a fixed rate and lock it in, you know what you’re paying. Variable rates are going up. I dare say I’d need to see a variable rate, a reasonable amount lower than the equivalent fixed, to convince me to go for it because they are going up. But at the same time, to contradict myself a little bit, I don’t think they’re going to go up much and very quickly. You know, caveat as usual. I mean, this is my opinion. I’m not an economist and economists have got it wrong many times over. But what we’re seeing at the moment is a pretty unique set of circumstances. So you’ve got cost of fuel and energy has gone up a lot. Now the cost of energy going up is through a number of factors. Russia’s made a big impact on it, but cost of energy had gone up. Commercial energy had gone up well before Putin decided to play city buggers. So the commercial energy cost going up has resulted in the rate of inflation to go up because, despite the fact that we’ve not seen until this month. The domestic price gap wasn’t listed. Even a commercial utility broke afirm, by the way, guys. So hit me up, but that’s why I’ve got a bit more of an insight into gas, electric than otherwise. But there’s been problems brewing for probably eight months, 10 months, in the cost of commercial energy Domestic price cap this month but there was no price cap in commercial. So the cost of energy has been going up and the cost of energy goes up. The cost of manufactured and stored goods goes up, which hits the shelves, the cost of fuel goes up and the cost of any transported goods goes up. So basically the energy prices and fuel prices going up has had a knock on effect to the cost of everything else going up which has inflated, bumped up inflation. Unlike historical times where inflation has been high, where it’s been through actual economic factors, this time it is because of something that’s happening that we need to see stop happening and then things will recover and I think there’ll be a natural dumbing down or reduction in inflation, as that happens over the coming 8 to 12 months. Now, saying that monetary policy is to increase interest rates to control inflation because interest rates go up, people stop spending, inflation goes down but the cost of goods isn’t going up because people are buying, buying. Buying Cost of goods are going up because the cost of making it and storing it and transporting it is going up. Inflation has gone up because people are seeing a direct 50% jump bump to their gas electric bills next month onwards. So once that subsides and then you’ve got the interest rate factor I always tell clients to think of don’t think of your colleagues, think of your patients. How many of them need this month’s pay to pay next month’s bills? I dare say the answer to most of you some of you private guys would be yeah. They need this month’s pay to pay next month’s bills, otherwise they’ll be in trouble Bump up their gas electric by 50%. That’s happened this month and will happen hit people in the coming months as their contracts expire. Your average person cannot afford to easily swallow a 50% increase in the cost of gas electric right Cost of petrol fuel. My God, I’m glad I work from home because I filled up the other day and it is just crazy If I was commuting. I remember when petrol was 60, 70 Pnm. It’s ridiculous now. I remember when the lorry drivers were blocking things when the cost of petrol was going to hit a pound. It’s. Look at it now. And all of these expenses, cost increases, are hitting people at once. People who are not in the negative are now People who had surpluses don’t anymore. Cost of housing is going up the cost of buying housing but the cost of borrowing is also going up. Now it’s a very fine balance before enough people get to breaking point that we tip into a very, very deep recession where we’re almost at the technical definition of a recession come next month, if we see a further period of depression, if interest rates have bumped up, the cost of housing is people’s other single biggest expense. That’s three things that have gone up hugely all at once. People won’t be able to afford to pay their mortgages, their bills, their rent. People will have to stop paying things and defaulting on things. That will cause a huge, huge problem. I would like to believe that the people in charge of the monetary policy, who are independent of the government, are intelligent people. They know and see this, if I’ve seen it, and the people who write articles for the FT and these guys, economists, have seen it. And the people who run the Bank of England, I hope, have seen it and have plans for it. I don’t think rates are going up very fast. The other thing to consider is let’s say that if a tracker rate is half a percent lower than a fixed rate let’s say a two-year fixed rate, assuming a linear rate of increase, broadly speaking you’d need to see a 1% increase in Bank of England rate for that tracker to have broke even with the fixed rate. That’s, for it to break even you need to see more than double the increase in the rate. In order to actually be better off with the tracker rate, you need to see quite a jump in the rates. So either the tracker rate has to be really good or I really can’t see the point in taking that risk.

Dr James: 

Look at the stock market. It’s the last few months, but yet we’ve seen inflation go crazy. That gives you a clue where it’s coming from Bank of England base rates. What they hate doing is ramping it up really quickly and bringing it back down, because that looks like they’re back tracking. So they’re more likely to do it incrementally, just like what you said.

Vinay: 

So that would be a quarter percent, spaced a few months apart, and I reckon we might see a couple more of those over the coming 6-12 months. So maybe another half percent increase, unless something really drastic and unexpected happens. But don’t quote me on this, guys. I’m nowhere near qualified to professionally advise on it.

Dr James: 

But this is it. You and I can say what we like and then the next thing you know, flipping it through the roof tomorrow. Because that’s the thing about the economy. You know what I mean? It’s all speculation. What we’ve said is what we would want. A reasonable person, in our opinion might suspect. You know what I mean. But yeah, of course, we’re always very quick with the fact that you really can’t make any decision based on what you say and it’s wide on what anybody says effectively, especially when it comes to the economy, and that’s why it’s always about buying, holding, playing the long term thing. But your insight is nonetheless valued, of course.

Vinay: 

And just to finish off through obviously it depends on the numbers. There’s no one answer at any given time for that question, because someone could have a 50% loan to value and someone could have a 90% loan to value. The differences in rates are vast so it needs to be answered on a case by case basis on any given day. But that, broadly speaking, yeah big difference in rates need to be seen for me to be attracted, to attract a rate at the moment.

Dr James: 

Awesome. Thanks for that. Another question, here’s a fun one James versus Vinay. This is how the question starts James versus Vinay which one is better for the short term A mortgage for five years or Bitcoin and rent for the next five years than mortgage? What do you think, vinay?

Vinay: 

Well, you’re very unlikely to lose any money if you buy a house, but you’re also not likely to become a millionaire by investing in a single property in five years. Let me rephrase that you’re not going to become a millionaire by investing in property in five years Bitcoin, who knows? You could lose the whole lot. You could be a millionaire and never have to work again a day in your life. You can’t get that with property in any space. You struggle to get that property over a lifetime, making enough money millions to retire. You’re a crew, your gambler is. My question back to you, to the person asking the question and how easily could you afford to lose that money? Those two things, I think would be quite prominent in decision-making here. Personally, if you’re that way inclined, maybe do a bit of both.

Dr James: 

That’s exactly what I was about to say diversify. And then here’s the thing if you diversify, but you do it with quantities of money that you’re never going to be sunk, should something go to zero, then guess what? You’ve got some skin again. I love questions like that because it gets into a very deep question about risk, which I’m not going to go on about too much today because that’s not the point of this webinar. But we have risk. What we have to weigh up is some people say bonds aren’t risky, but really, would the greatest risk not be that your investment is not outpacing inflation, whereas then you have stock currencies, which are going to be risky because they’re volatile. But actually, if you want to increase money, probably that’s the only way to do it Long term no financial advice given. And then if you really want to set things off, then it’s about having some skin in the game and something that’s got the potential to really give you some serious returns, like Bitcoin, but not overdoing it at the same time. And that’s what I’ll say on that one no financial advice. Obviously, you have to weigh it up on a case by case basis what you want, because what you also have to consider is over what period of time do you want this money? Here’s what I’ll say to you. To the person who answered that question Look at the charts for Bitcoin. Nobody’s ever lost money over a four-year period. That’s if the historic data continues to hold true. Again, we can never promise that, but it’s just an interesting way of looking at it. To the person who answered that question Awesome guys. Thank you so much for these brilliant questions. By the way, let’s flick back to the Zoom questions. We’ve got a few more that have crept in here. Here is another anonymous question, vinay. So I’m looking at this question. It’s a little bit of a wordy one. I’m going to start reading it out and we’ll see how far we get in terms of Can you send me it?

Vinay: 

on WhatsApp, so I can read the question at the same time.

Dr James: 

Yeah, a Facebook message. Yeah, if I did that, if I had some extra arms, I might be able to do it on WhatsApp. But I’ll tell you what if I send it to you on Facebook, then I can read it.

Vinay: 

At the same time, I’ve had a couple of messages myself, so after you’ve finished your questions, I’ll read them out, if they haven’t already messaged you as well. Cool, how about Vinay.

Dr James: 

If I was to send it to you as a private message on Zoom, Would that work for you as well?

Vinay: 

I’m assuming. So yeah, yeah.

Dr James: 

You see it, I’ve sent it across to you. So if you hit the chat button it should appear right now. It’s the one from me. I don’t know if you can see that, Should we?

Vinay: 

Yeah, yeah. How much would a bank lend if someone has two years in that one? Yeah, okay, so I’ll read it out at the same time. So how much would a bank lend to someone if they have two years of tax returns bracket combination of salary and self-employed? My understanding is the common belief is four and a half times yearly salary. So if year one is 80 and year two is 120, would it be four and a half times 120 or four and a half times the average? Okay, there’s no simple answer to this. You are right that most lenders will take a two-year average and most lenders are lending four and a half times to self-employed applicants. When I say most, that just means more than 50%. There are numerous lenders, as I alluded to earlier, that will lend up to five and a half. There’s one lender, like I said, that will go to time six Caviar. Their rates are not great. Before all of you guys start messaging me to get time six and then saying, no, that’s a crap rate. They are not brilliant, but it serves a purpose, typically high street lenders. Four and a half times, some will go to five, some will even go to five and a half. I can get five and a half times income multiple with fantastic rates, market-leading rates. There are lenders that will ignore your former year and work only on your most recent year in isolation. If you’ve had a big jump in income and the two-year average isn’t cutting it, then we can go with a bank that will use only the most recent year. Another point that wasn’t inquired about but I feel should be included is I’ve mentioned two-year average. They only take a two-year average when the income is going up. If your income is the less in the more recent year, the bank will always take the lesser, more recent figure. So really, on your question, I could squeeze 120 times 5.5 in this situation, hypothetically assuming you were still doing both jobs. Awesome, anything more you wanted to say. It depends on deposit, credit conduct and, of course, purely talking income multiples and nothing else.

Dr James: 

Yeah, Top stuff. Thanks for that, fenei. Okay, I’ve got another one here for you. What reasons do lenders reject mortgages? I suppose, broadly speaking, what’s the most common ones.

Vinay: 

I think I got that direct. Oh no, that’s for everyone. I’m seeing those as well. Okay, yeah, sorry. Reject mortgages. All right, we’re going to talk about normal lending policy now, not bespoke lending, because bespoke lending is immensely complicated and doesn’t often follow logic all the time. So bespoke meaning you don’t fit that two years of accounts, mold or salaried, so you’ve changed your limited company recently or you’ve started self-employment recently something like that Credit history. That’s the single most common cause of failing a mortgage applicant. In fact, that’s the same for bespoke cases, even more important than bespoke cases, because when you’re asking them to bend a rule, they like every other factor to be directed straightforward. They don’t like to bend the rules on something that’s already a little bit crooked. So if you’ve had any missed or late payments, they can cause problems. The one we get more often than we should is young dentists not long after graduating because, let’s face it, you’re 18 to 23 years old. You’re changing the address every few months, every year. Are you going to really understand why it’s so important to make sure you pay that last five quid of your energy bill that you’re named on when you move house? Are you going to make sure that you’ve settled everything and paid it all on time. We get people who get a CCJ brought up on their credit file they didn’t even know about because it was an address they haven’t lived at for three years, because they didn’t do mail forwarding or something like that. I mean, who’s going to do mail forwarding? If you’re a 22-year-old student, you have an extra 10, 20 quid left to pay on your gas bill. Move out. They send the gas bill. They haven’t got your next address. They keep sending reminders. Eventually it goes to CCJ. You don’t find out until we submit a mortgage application for you that you’ve got a CCJ and the mortgage has been turned down. So those things are the most common. The other things really should most. 99 out of 100 times we know that that’s going to cause a mortgage to fail. So I’ll tell you you’re not going to be able to get that mortgage because it will fail for X, y and Z reason Credit history. It fails on when we ask the questions but the client says no and they didn’t know about it, so they couldn’t have told us. It was unexpected, pretty much anything else you can really think of. We would know about it and we would be able to say that’s why it’s not going to fit. The exception to it is bespoke lending, because sometimes we describe the best we can in great detail to an underwriter Like underwriters are not that long ago for a case say they wanted a reference. This was when there’s two months left of the tax year. So back in FEM wanted a reference to confirm the earnings for the applicant for this year and the reference didn’t say the word guarantee or something like that. The underwriter rejected it. Oh, the reference doesn’t guarantee that this is what his earnings will be. And I replied saying unless you’re going to let the guy borrow your denorean, I don’t understand how an accountant can guarantee what someone’s going to earn two months in the future. I said it’s a reference with 10 months out of 12 that passed in the year. The underwriter said oh no, I can’t accept it because it doesn’t guarantee the income. I said but to guarantee the income would have to wait till after April and if it was after April we’d just file a tax return. Why would we need a projection? We’re dealing with humans here and they’re not always highly educated, great experience in finance humans. Some of them are in a job that you and I may not feel that they’re as skilled in and they say things and then they change their mind. They misunderstand things. Underwriters have egos too. Sometimes they make a mistake and highlighting that error doesn’t always get them. I didn’t actually ask him if he has a delorean, because that would have got his back up, but sometimes people don’t like to admit they’re wrong and even though we can send them all the evidence to show them actually what you’ve said isn’t the case. They’ve made a decision now and they’ve said it to someone and they don’t want to look as though they’ve changed their mind. They may have misjudged it before. So bespoke lending it could be anything. It could be just that they’ve changed their mind. But with normal lending policy, credit history and property value wouldn’t cause it to decline. Usually it would cause the size of the loan offered to be a bit less if the property values are less than you thought, or you’re paying for it, or if there’s an actual problem with the property. So, for example, I had one a year ago a spray on insulation for the inside of roofs, a spray phone. They come in with this big hose and they spray all over the inside of the roof, directly onto the tiles and the rafters, and it causes all the wooden rafters to rot from the moisture it traps in and basically it condemns your roof from a mortgage lender’s perspective. They will decline the mortgage application because the house has a condemned roof and the guy’s mortgage got declined when the value went out and said look, we can’t lend on this. The spray on phone House needs new roof. The guy had to negotiate with the seller of the house to have a whole new roof fitted to the house. We can’t even recover the tiles because it’s cheaper to buy new tiles than the labor to pay your tradesmen to scrape the old crap off the tiles. So you literally need a whole new roof and then you got the mortgage approved. Other ones are EWS1 forms. They’re usually needed if it’s a flat. So EWS1 is a form, a report that shows that there’s no combustible material on the property, ie cladding a la Grenfell. So if you’re buying or remortgaging or selling a property of flat, there might not be any cladding on the building but you still need EWS1 form to say there’s no combustible material Very slight exception to it. There’s one lender that will actually accept a letter from the management company confirming there is no combustible material on the building. But what you’ll find is that they’ll not write that unless that actually is the case. So there’s no ways around that. Those are really the only things I can think of. Reasons I will decline a mortgage application is people tell me they earn one thing and then the documents come in and show a totally different figure. And I tell them, sorry, you can’t borrow as much as you wanted to because the figures you’ve given me don’t match what you initially said, or debt to income ratio is too high. Again, usually we catch that early on the debt compared to your income. It doesn’t come up much with dentists, because by and large, dentists are not people who get into much debt. Credit conduct debt Buying a house too far away this is one. People want to move and they’ve got the self-employed five years in Birmingham and they want to move to London. They want to buy a place first, or they at least want to get a mortgage agreed first. The bank’s saying how are you going to pay your mortgage when you move to London? You can’t commute to Birmingham, so they’ll want some evidence that you’ve got a job offer lined up, and so that can sometimes cause a bit of a fly in the ointment.

Dr James: 

That’s cool Stuff you’d never think of. Some stuff you’d never think of.

Vinay: 

Awesome that all I can think of now oh, name not being on the electoral roll. That has sometimes caused an issue and then we’ve had to get the client to register in it. Then it can take up to six weeks before it’s updated. So that is one I tell people who are younger. Young people are asking me what should I make sure I do or don’t do in preparation to buy my first house? And the two things I say say there’s as much deposit as you possibly can and make sure you’re registered where you should be for everything. So you’re on the electoral roll at the address you stay at. The bank statements are registered at the address you stay at, but not your mum and dad’s, which is the natural thing to do. If you’re renting, you leave your bank account at the permanent mum and dad’s place, not your rental, but the bank wants your bank statements to show that they’re coming to the place you live at. So I’ve had to get clients to update the bank statements with the bank, update the address with the bank and get a new statement sent out before the bank would agree. I think that’s all that comes to mind. That’s brilliant.

Dr James: 

Quick question. This is me. This is one from me. When should people involve you in that conversation about when they’re going to move house? Should they involve you the instant they decide they’re going to move house or when they’re thinking about it? Is there like an ideal time frame that you would see a client before they make that decision?

Vinay: 

Early, early on. You need to confirm you can get them all before you actually go, wasting your time viewing them and making offers. There’s nothing more stressful. No, dentistry is a stressful occupation. We have different types of stress, of course, but there’s also an element of stress of knowing all of your clients know each other and talk to each other, and when someone’s put in the guilt trip on you, you know oh, go on, please. I really, really love the house, my missus loves it, and it’s like I’ve never spoken to you before and you’ve rang me up. I’ve had an offer accepted for £1.4 million on this house and, yeah, I just bought a practice six months ago and changed to a limited company and have a 5% deposit, all right. So this house has been looking for two years and it’s perfect for us, please. And you know it’s stressful for everyone involved because often the reason that they come at that stage, you know they’ve gone to another mortgage broker who said no, and then they’ve looked online to find out who’s the go. You know, go to a dentistry, contact me. But by then you already had an offer accepted two weeks earlier and the estate agent’s been breathing down your neck since last week. And then I’m jumping in. Speak to us early. That’s the bottom line. If it’s a complex case, I’ll get a pre-authorization from a bank by sending your financials through, saying this is we will lend this much subject to the normal full application checks, ie credit history and so forth, but we’ll confirm your financials with the bank. So I’ve got a dentist who’s changed from a sole trader to a limited company six months ago or bought a practice a year ago. First year’s profits were low because of all the capital deductions. But we’ve got an accountant’s reference or management accounts and the guys who always want to buy your very expensive properties with big mortgages are usually the ones with complex financials. And we need time. That’s the thing is, we need time. You know, sometimes we need you to file your tax return that you’ve not filed yet and that takes time. And all of this time if you’ve got a vendor in the background putting pressure on you and an agent putting pressure on you, well, we’ve told you it’s going to take us two weeks to get a decision, but you don’t want to tell the agent that because you think they’ll lose the house. It becomes quite unpleasant for everyone until we get that final agreement. You know stressful. It’s stressful. So if you’re looking to buy a place, just give us a heads up, speak with us. If we think you can’t afford it, we’ll tell you. You know, as simple as that. But if you can get it, it’s in my interest. The bigger the mortgage, the bigger the pay we get from the bank. So if you want a big house, big mortgage, I want to get you that big mortgage. I don’t want you to have to downscale. You know, if it’s possible, we’ll get it If it’s the right thing for you. But we need time.

Dr James: 

Top staff. Thank you for that. We are coming towards the end of the session because I’d like to keep these two around an hour. I think we’ve got time for one more question. Can I answer?

Vinay: 

I’ve got. We’ve got Quick question. I’ll answer the bonus question. Just pay, sorry, you go on. I’ll ask this after.

Dr James: 

Yeah, absolutely. Oh. Yeah, we can throw some more on top. Oh, there’s one that’s caught my eye here in the chat, though it says who’s your barber. I can only presume that’s directed at me.

Vinay: 

Who are they talking to?

Dr James: 

It must be me, Must be me right.

Vinay: 

I don’t know, it’s probably me. I buy mine from LifeSize Lego man. Just click mine on my head.

Dr James: 

Top stuff, top stuff. We’ll never know, I guess Did you want to. Sorry, vinay, I might have just jumped in there when you were about to say something.

Vinay: 

Yeah, it’s just one question. Just paid my mortgage off. Does this mean I’m a first-time buyer again if I was to buy another property? You’re only a first-time buyer when you buy your first property. That means the discount where you don’t pay any stamp duty on the first 300 of the £500,000. Again, this is England and Wales. It’s slightly different in Scotland. You are not going to be an additional. Well, let me rephrase If you move house, no, if I buy a house locally for my mother-in-law to live in, not too close to home, obviously mother-in-law thinking of paying cash for new property by maybe the small mortgage will have to pay a higher stamp duty. Yes, second property acquisition will have to pay the extra stamp duty, unfortunately. Yeah, it is purely off the basis of owning the property. So that’s it. It is ownership of a property, not mortgage. The only exception to that rule, which we touched on on the webinar with Bilal, is if you’re buying rental properties in a limited company, they don’t count as you owning them. So then, if you buy a property after that, you’re not them counted. I think that’s the only question I got myself, James. Was there any more you wanted to ask?

Dr James: 

Yeah, I reckon we’ve got time to squeeze one more, and there is a question here in the Zoom chat from Aschana, which I will just read out, and then we’ll probably wrap things up after that, because I like, as I say, it’s nice to keep these things for about an hour. So for anybody who didn’t get their question answered today, feel free to reach out to Vinay. Vinay Rathod on the group will jump in with Aschana’s question now. Is it easy to switch to a consent to let on a residential mortgage if you wish to rent your property out midway through your mortgage term?

Vinay: 

Yeah. So most lenders won’t go on consent to let within six months of you taking the mortgage out with them, because they will be of the opinion that you did it on purpose to try and circumvent. Brokers don’t actually have any involvement in consent to let process. This is every bank does it directly with the client and only directly with the client. There’s no involvement of the intermediary here. I suspect for the purpose of the bank. Don’t want the risk of coaching, but basically, if it’s a legitimate reason, I got consent to let when I moved to London. When I wanted to be a dentist, I had to go to a college course at City in Islington and then apply at Dentist Street dental school. I had a clue if I’d get in and if so, where. So I didn’t want to sell my house. I might have flopped and had to come back home. So I rang the bank up and I said look, I’m going to let my house out for at least a year. I’m going to college. If I fail or cock up I might end up having to come back and move in again. I said so I don’t want to change the bike to let. I don’t want to sell my house. I will do one of the above once I know what I’m doing. And then, a year passed, I got incidental school. I still wasn’t ready to decide what to do and they agreed to extend it for another year. My reasons were genuine. That is exactly the type of scenario consent to let is in place for and they would have granted it as long as I needed. Another typical scenario for consent to let is you own a small place, you know your first time home, but a two, three year fixed rate or left on your fixed rate. You want to buy a bigger home and you want to keep this place and let it out. So changing it to buy to let could mean that you pay a penalty fee. Yeah, in that scenario you could get consent to let. So let’s say you’ve got six months left on your fixed rate year. You just say to the bank buying a new house, I will be selling this house or letting it, but if I do that within the next X amount of months I’ll pay a big penalty fee. So I want consent to let for the next whatever period of time after that I’m going to actually change it to buy to let or sell it and they’ll let you do that I’ve never known. I’ve never heard of someone declined when they’ve asked for consent to let, but that’s because we don’t have any involvement in the actual process, so I don’t know when they do. Yeah, but it’s really easy. Just keep in mind some lenders will charge you an admin fee and will increase the interest rate, and when you have consent to, let you won’t be able to transfer to a new product with the same bank. So let’s say you’ve got six months left on your fixed rate. You get consent to let Move moving with your partner or backing with your parents or whatever Rented accommodation Fix rate comes to an end. Not sure what to do just yet, and usually you can just go straight to the product transfer. We don’t charge fees on product transfers, by the way, guys, if it’s staying with the same bank. So we or you go directly to the bank and you just do an immediate switch existing borrower transfer. You don’t need to evidence your earnings because your mortgage is already with them. You just get to pick one of their existing borrow rates. But you now let your property out. You’ve got consent to let. You cannot pick a new rate. You go on their standard variable rate, which is 4%, 5% variable until you can find an exit solution. So just be careful. Obviously you know if you’re letting the place out you need to get consent. But also think a few steps ahead and just make sure you’re not shooting yourself in the foot.

Dr James: 

Top stuff. Anything more you wanted to say on that?

Vinay: 

I really know. Just to highlight that you should not let your property legally. It can get you in trouble and just since I’ve got the opportunity to be on there, a lot of people don’t realise this and I think it’s because a lot of brokers can be quite flippant about doing it. But those brokers don’t give a monkey’s if you lose your career. You know they’ll never speak to you again. You’ll never speak to them again, you know, but I do. You know mortgage fraud is a criminal offence. You’d have to let the GDC know you lose your career. So, lying on a mortgage application saying it’s a residential, when you know you’re going to let it or vice versa very bad idea. And you know I’m sure loads and loads of people do it without getting caught. If you’re going to do it, just don’t pick up the phone and tell anyone. But you know, don’t if you, if you actively want to do anything, that’s a bit naughty. Just remember that the consequences are probably a lot worse than you might have thought, because we do get the odd question and nine out of 10 of them, as soon as they find out they’re devastated, they go. God, no, I’d never do that then. But one out of 10 gets off the phone and I know they’re going to be on the phone with another broker, except this time they’re just not going to tell them all of the facts and just sort of you know I know what not to tell them next time. But just be careful, it’s just not worth it to lose your career over.

Dr James: 

It’s a bit like a cantoncy, isn’t it? You know what I mean? Like that’s why there can be so many of the kinds who will quite happily fiddle your figures, because it’s you that’s liable. They will.

Vinay: 

Yeah, it is you that’s liable, even if you do it through me, because ultimately, unless you’ve got a recording or something where you’ve literally told me and I’ve said, yeah, do this, any broker is just going to say no and know what you’re talking about. The problem is, you guys all know each other. You’re all my clients or my future clients. I, you know, I don’t want to be responsible. You’ve frozen a live or not. Oh, you’re back, I’m back. I don’t want to be responsible in any way. Yeah, I don’t want to be responsible for 10 years down the line, someone losing their career. You know my clients are friends. They’re friends of friends. That you know. We know them. They’re part of a community to talk to each other. So you know, to us it’s extra important we do the right thing Because otherwise, if it goes wrong, you’ll tell your colleagues about it and that’s. We don’t want that. You know. We don’t want anything bad happening and we certainly don’t want to be the cause of it.

Dr James: 

Well, this is it. And to go back to the account analogy, that’s why the best accountants even though it’s not really you know going to be on them should things not go well, they have your back because they actually care. And that’s the thing for, obviously, in your realm and what you do to Vinay. You have been so kind to your time tonight. Thank you so much. Ok, thanks for having me. Dude, oh, dude, my pleasure.

Vinay: 

Thanks everyone for tuning in and watching.

Dr James: 

Dude, my pleasure. Welcome back any time. Guys, thank you so much for coming along tonight. We had an amazing attendance for a value packed webinar. Vinay is available on the group Should you need him. Should you require any further assistance, apologies, sincere apologies to the people that we didn’t get round to asking your questions tonight. We’ve just run over time, unfortunately.

Vinay: 

You are welcome to message me privately if you need an answer to a question. It is busy, it might take us a day or two to get back, but I will get back to you.

Dr James: 

There we go. Top stuff, Vinay, as I said. Thank you once more for your time, Guys. So good to see everybody tonight. We will catch up very, very soon. I’ll see you all later. Bye.

Vinay: 

Thanks everyone, thanks James.

Dr James: 

Bye-bye.