Dr James, 0s:

Today we're here to talk about mortgages. Being wet in London, we did a podcast on mortgages, and you know what? There's something that affects most of us and it's I'm here today join by Daniel Marks, Independent Mortgage Broker. And what we wanted to do today, we wanted to breakdown my mortgage and make them really simple so that everybody, regardless of what stage you are at in your journey, will benefit from this by getting the key key facts as to what you need to know. What are those key facts and what are those things that you need to know? It depends on where you're at in your mortgage journey. You're either going to be a first-hand banner, second hand embanger of sorts, and then include purchasing your first BTL, or you're thinking upon a re mortgage. All of those things going to be covered in today's podcast, looking forward to it as ever. As ever, you can claim your CPD for this episode within the official Dentists Who Invest Smart Money Members Club. Smart Money Members Club also includes multiple mini courses and webinar series on finance for dentists, including how to become as tax efficient as possible, as well as understanding investing. All of this content comments as verifiable CPD, and you can download your certificates there and then upon completion of each lesson. In addition to this, we also include a whopping 10% discount on your dental indemnity and a 5% discount on lab bills for dental principals, amongst other perks and discounts for members. Please use the link in the description to claim your verifiable CPD for this episode. Hey Daniel, so obviously, we give everybody a little bit of background to yourself in today's podcast. So I think we can just hit the ground running, really, and let's talk about what you need to know specifically at each stage in your mortgage journey. Let's start from the start. That would seem to make sense. And the start would obviously be a first-time buyer. Let's talk through that. And of and just one more thing I wanted to add just before we jump in. It's not just what you need to know in a generic fashion, it's what the dentists need to know as well, just so we can really drive this home to the audience.

Daniel, 1m 54s:

Yeah, fantastic. Well, it's great to be here. Thanks, James. Um, I I think there's so many things that you can consider when it comes to purchasing your your first property. And the appliance I speak to dentists who are, you know, they've they're doing they might be doing their foundation course, they might be um newly self-employed, they've got their first associate position. There's so much um confusing information about there. If you type in how can I get a mortgage, you're gonna get 10, 12, 15 different options of what would be what would be possible. So it's so important that we're getting good information um out there to to to newly qualified um uh dentists. And you know, if we're talking about the uh A to Z of mortgages, you know, the first one is well, uh first of all, how long do you need to be working for? How much money do you actually need? Um, and what are the what are the things to remember? So um this is this is uh can be quite a confusing element. So uh if you're in your um foundation year, and so you've you've finished your um unicorse and you start in your foundation year, you can actually do it with on that current contract with your pay slip. So if you're earning your 42,000 as a foundation dentist, or you might be doing a hospital route or something like that, um, you can actually do it with a pay slip. So if you like the area that you're living in, then uh don't feel like you necessarily have to delay. If there's somewhere that you want to purchase and make that your long-term home, it's well worth doing that. Um, and it can be quite sort of straightforward to do it in that case. There's lots of lenders that are happy with that one-year um contract. The real difficulty can come when you get your first associate position. And this is a like many of my clients I'm speaking to at the moment are really confused about this because uh when you put this into you put this into Google, you put this into Chat GPT, it'll say you need two years accounts as as a self-employed. So you've got this huge gap where uh you know you you think, well, I've got to build up my earnings, I've got to sort this with my accountant, I've got to do two years. But it's not actually the case. What it's worth remembering, now this isn't the case for everyone, but it is quite um dentist specific. It can also apply to some um sort of you know locum GPs and anyone who's in sort of recognized um medical professionals, they'll also do it for accountants as well. They'll do it for people who have um sort of any kind of charter qualifications or things like that. But for dentists in in particular, the lenders want they want your business. They know that there's a you know, a typical career path for the dentist is going to be um exponential in a lot of cases. So what you earn in your first year isn't going to be what you earn in year five. And the mortgage lenders know this, you're taking on a long-term commitment and they're happy to take a little bit more of um uh a risk without you having a history because they know how hard you've worked to get that qualification in the first place. You know, you've done at least five years, you've done at least one year of um uh foundation. So you're six years in by the time you're even self-employed in the first place. So it's um there are lenders that are willing to be flexible on this, and you can do it from as early as sort of three pay schedules into your um into your first um uh associate position. Like depending on what the makeup is, so you might be if you're taking on an NHS position um and you've got a UEA value and a contract um uh value, then uh again there's a few more options there. There are still options if you're uh if you're fully private straight out of um uh foundation as well. Um when you then get to so if you imagine this timeline, you know, you've done your uh your first year um uh you've done your foundation, but in September, you're likely to then start your first um associate position. By the time April rolls around, so we're only talking you know, seven, eight months into that, you can in theory file your first self-assessment. And what that'll include, it'll include your income from the um uh from your foundation when you were employed, and it'll also include your income as a self-employed associate. And we can use that um to get you lots of sort of high street option um uh lending. So it's not uh a lot of people kind of think, well, I've got to I've got to be self-employed for a year before I can even get in the door. So I think the probably the headline for that is is just just make sure make sure you speak to someone. Don't don't feel like you're a write-off just because you've gone that dreaded word self-employed. Um because you know, you can you can make a mistake otherwise, you know, some people aren't ready to buy a buy a house um at that point. You know, you might want to move areas, you might want to consider your options, but definitely don't don't write it off until you've uh spoken to someone about your circumstances.

Dr James, 6m 52s:

I heard on the Great Fine, and you can confirm this if this is true or not. And maybe you said this earlier, but just to recap, because it's worth mentioning again for Dennis, that the very minimum some lenders will accept is three months pay schedules, fact or fiction.

Daniel, 7m 5s:

That is that is fact, that is true. Um, so it's a really good, it's a really good thing to remember. Um, I'd say for those particular examples, um, because there are there there are so many lenders like you know, a a good whole of market broker will have a hundred, a hundred and twenty, a hundred and thirty different lenders that they can they can choose from. There are some um, you know, if it really depends if you need what's called um um high learn-to-value lending. So, and this is often the case for you know young qualified dentists who might not have a lot of money. You know, you've spent so long in university, you've spent you know long time training, um, and it takes time to build up that deposit. So some of those three month pay schedule options do need a slightly higher deposit, but there is um there is a lender that will do it on a 5% deposit. So um, you know, equally you can do it, uh you can um, you know, by the time you get to a a year's account, so that's in that April um after you've started your call, you can actually get a zero percent deposit mortgage as well.

Dr James, 8m 8s:

But I was gonna I was gonna I almost didn't ask that question anyway. I'll let you finish. I'll let you finish.

Daniel, 8m 13s:

Yeah, no, it's not it's those those 0% deposit options, they are it it never you it well I say in recent memory it's not been the case, like in the last few years they've really come back, you know. Um there are lenders that will do do they'll do 0% deposit. Um there are others, there are other high street banks who have launched new products um recently where you only need 5,000 pounds deposit and they'll go up to 99% loan to value. So you could buy a £500,000 property with a £5,000 deposit. Now, there are there are risk and health warnings with that. Um, you know, the risk of going into a negative equity, you know, you are getting a mortgage out for that 99% level as well. It could, depending on where the market goes, what it's like in your local area, you know, when you come to remortgage time, you might find that you're stuck with that lender because you can't remortgage onto a lower lender. But so there's there's lots of ins and outs of that, but you know, just because you've not got tens of thousands of pounds in the bank doesn't mean that it potentially those options are over to you.

Dr James, 9m 20s:

Um nuts. And you know what? I was about to ask that exact question. Does zero percent finance exist whenever it comes to residential property? Um as in you know your primary residence. Um, because obviously it exists whenever it comes to practice finance, like that can be done. I even saw, I think I saw 1.8 million, um, zero percent uh the other day, a zero percent deposit. 1.8 million was lent.

Daniel, 9m 49s:

Yeah, I was gonna say it can be really you can be really useful when you um if you if you say if actually you do have money in the bank, but you need it for other things, you might want to you might want to invest it, you might want to um, you know, spend uh you know use that money for other things, you might not want it tied up in your in your residential property. So um, you know, having those nor or or or five percent deposit options can be really, really useful. For some, it's an absolute necessity, but for others it's a it's a you know an informed choice.

Dr James, 10m 20s:

Crazy, man. That it's nuts. Yeah, just to just to be clear, that that 1.8 million was on a down practice, um, not on a residential property, but it was 0% finance. And it seems to be, I mean, a few months ago I was chatting to someone who was in practice finance, no, maybe like a year ago, and they were like, Oh, yeah, you can get 5% um loan of value now, or 5% deposit rather. Um and uh I was like, Oh, that's that's that's that's pretty crazy on dental practices, and then it became 0%, but it was only up to you know, there was no official rule on how much you could borrow, but he was like the banks get uncomfortable about the 1 million mark, 1.2 million. But now then I saw one the other day and it was like 1.8 million, 0% fine or 0% uh deposit. And I'm like, man, it's just getting higher and higher. You know what I mean? Um, so I was gonna ask, but you took the words right out of my mouth. Does that happen in property? And it does, but there's some T's and C's and small points, right? UK dentists, Dennis Who Invests now has an official platform where you can learn about finance and obtain UK compliant, verifiable CBD at the same time. The only platform that exists on which you can do both. The Smart Money Members Club has hundreds of hours of mini courses, webinar series, and live day recordings on all things finance slash tax efficiency for UK dentists. This includes complete courses on how tax works for UK dentists, finance so that you can invest and grow your own money, business so you can improve your profitability as an associate or principal, and for those out there that want it, there's also a mini course and how you can responsibly enter the crypto space using measured amounts of capital. I've gathered this content from the best of the best I could find in each respective area so that you know that this is how people at the forefront of each field advise their clients. The Smart Money Members Club also contains discounts on common things that UK dentists need to pay for on a regular basis. This includes a whopping 10% discount on dental indemnity, the offer to beat your income protection deal no matter what you're paying, and for the principals out there, 5% discount on lab bills and 10% discount on practice insurance. These are designed to offer hundreds, if not thousands, in annual savings. The purpose of this members club is to not only boost your monthly income but also manage your outgoings as much as possible and therefore create more profit to celebrate the launch of the Smart Money Members Club. And given that the CPD deadline is coming up soon, I've decided to offer the first month of this platform entirely for free. This offer will end in the coming weeks as soon as the current CPD cycle is up. To collect your CPD for this podcast episode using the Smart Money Members Club, feel free to use the link in the description of this podcast.

Daniel, 13m 11s:

I think you have to, you know, it's not it's not a utopia, you know, because otherwise, you know, everyone might do it. You will you will pay more in interest rates. So again, this is something that I often explain to first-time buyers is actually the the way that learn to values work is that every five percent that you go down, you're going to get a better interest rate. And so you're not only borrowing less, so your your your your costs are less there, but the interest rate is also less as well. For some people as well, um the the acceptance rates are are easier as well. Because if if you imagine this scenario, you know, if you're borrowing 100% of the value of your property, the bank, the lender, is taking on all that risk because in likelihood, if they had to force a sale, then they're not going to get 100% of their money back. So it the the underwriting criteria, the credit criteria, the income criteria are all tighter for those products, and you'll also pay more for them as well. Whereas every 5% you go down, the interest rate will be slightly cheaper, and there'll also be it'll be easier to be accepted on because you are putting more of you know your deposit in into that property. So the risk is less for the for the for the lenders.

Dr James, 14m 24s:

Tamides, and I'm just curious to know, and then we'll move on because I I definitely don't want to uh we we've got other stuff, plenty of other stuff that we want to cover today. Uh Tamides, uh can you give us some an example of how the interest rate might look on a 5% deposit versus a 0% deposit um for like 1 million borrowed, I'm gonna say, or 500k, or just yeah, of course.

Daniel, 14m 49s:

Without working at the exact figures, but there is a there's a 0% lender at the moment that will do it for 6.09%, which you know is a is uh um is gonna be higher than it would be on a 5%. I mean, this is obviously we're talking as of kind of you know, we're recording today on the um uh so rates are changing all the time, but you could get a 95% product, that's a five percent deposit for around about five and a half percent at the moment. Um but there is a there has been a pressure uplift recently on that.

Dr James, 15m 24s:

Interesting. So it's not a million miles away, right? Like it's 0.5%, you know what I mean? I get that that components and whatever, yeah.

Daniel, 15m 30s:

You know, and it it's worth it's worth then saying actually from that, um the these change wildly depending on market conditions, but the the UK mortgage market is one of the most competitive in the world, and you know, lenders are fighting over trying to get your business and win market share for various different demographics. But for a um, especially on fixed rates at the moment, um, you know, I mean I was looking at five-year rates this morning, there's only about a 0.5, 0.6% difference between 95% products and 60% products, so it's really narrow now. So whilst yes, we've just talked about that rates are gonna get cheaper the more deposit you have. Actually, the the the difference there is not as vast as it is it is sometimes. It really depends on how pressured the the the market is. You can see a constriction at the at the at the top end.

Dr James, 16m 24s:

Fast knitting. All right, let's move on. But because it is worth mentioning that if anybody wants to know more about these things, obviously feel free to reach out to Dan. But in the interest of time, we do want to move on to the second category of people that we outlined in the intro of the podcast today, and those are the second time buyers. Uh, and the reason that we chose that exact wording was that also applies to people who are, how can I say this, buying their next house, okay, because they're moving their primary residence, or they're buying a BTL, or they're buying any other property under the sun. So, how what what what do those people need to know that it distinguishes them?

Daniel, 17m 1s:

Absolutely. So yeah, so first thing to do, plan, plan, plan. You know, if you if you're thinking, okay, traditional scenario, I'm gonna sell my property and I'm gonna buy a new one, get your ducks in a row before you do this. So the first thing to check, especially if you're someone who's re mortgaged or you purchased your property between two and five years ago, the chances are your rate that you've got is gonna be cheaper than what you can get today. Again, so the first thing that you want to check is go back to your first mortgage offer that you got and look to see if there's a porting clause. So, what that means is you can take that mortgage with you to the new property. So uh let's say, for example, you've got a you've got a £500,000 mortgage, you're buying a property that's worth um a million. Now, uh you you might not have the other £500,000 you need, so you need to borrow more. What you can do is you can take your cheaper rate mortgage for £500,000 with you, and you can take out additional borrowing um with the same lender to facilitate the purchase of the property. So I'd always suggest having a look at that first because uh it where it's uh cheaper to do so, it can be the the the best way of doing it. Some health warnings, of course, you know, um you have to be if you're doing that, you have to meet the criteria of the lender at the time. So lenders change their criteria all the time. So you've got to meet affordability. Um uh on that, you've got to um, you know, meet their credit criteria, meet their income criteria. Um, so but it's often the first thing to sort of try and discount before you then um you know move on. Uh next thing to to look at is your and where are you within that uh within that cycle of your mortgage. You know, if you're someone who's just taken out a uh a five-year fixed rate mortgage and you're a year in and you've got four years to go, you might have a if you can't port the mortgage, then you're probably gonna have to pay an early repayment charge. Um, and those are typically, although they're different with every lender, they'll go five percent, four percent, three percent, two percent, one percent in each year. So if you're trying to move house and purchase a new property um within the um within the first year on a 500,000 pound mortgage, you know, that's that's five percent, that's 25,000 pounds that you're gonna have to pay for the privilege of of doing that. So it's um you've got to plan these things first and check what your costs are gonna be, because um uh you know, and you can you can factor these in. You don't necessarily have to have the money up front. It's the same with with stamp duty as well, um, which is often another big uh killer in terms of um you know moving house. It's the thing that really constricts the top rate and why uh properties that are you know north of 500,000 pounds in the UK are um are you know can be harder to sell because the person buying it has got to fund a lot of um uh a lot of tax as well when when when when they do that. So but you can roll this into your next mortgage. So if you've got a mortgage to redeem, you can actually borrow the amount to on top to cover the cost of your early repayment charging necessary and the cost of your stamp duty, and your solicitor will handle the disbursement of that. So you know, don't necessarily let it be a factor. If you have got a lot of equity in your property, um, but you want to, you know, you want to upsize, um, then you could absolutely um you know consider doing that. You don't necessarily need to break into the ISA to to get hold of that.

Dr James, 20m 48s:

Fascinating because I guess one of the incentives keeping all that money in the ISA is if your interest rate on your mortgage is much lower than your rate of return in your ISA, well, obviously that's your margin effectively. Um and a lot of people don't get that. And that this is the thing. Um, my personal philosophy, maybe everyone doesn't agree with me, okay? But my personal philosophy is providing my debt interest rate is lower than the rate of return that I know I can attain in my investment accounts. Not just marginally, but you know, by by quite an amount, which it often is, and it still even isn't today's market, um, that that should be the priority. Um and it's the reason why an interest-only mortgage can work extremely well for some people, for some. And the reason is that when you have to pay that lump sum off at the end, put all the money in the asset tax free, which has been compounded at a rate of 10% a year, you basically pay that off with the with the what you've the the the capital that's in there, and you have a very nice chunk of change on top. Um, obviously it takes a lot of discipline to do that, and it's going to take you a few years. But anyway, I'm just sharing this stuff so people know that there's alternative methods out there.

Daniel, 21m 57s:

Go on, absolutely, yeah. It's a completely it's a completely valid to key. I mean, and as you say, as you say, it's not for everyone. It's the same with um it's the same with tracker rates. You know, at the moment, if you if you can tolerate some risk, um tracker rates are the the the the are sort of about 0.6 0.0.7% cheaper than than fixed rates. Um that's because of where kind of the Bank of England base rate is at the moment and is expected to to move up um uh when the next meeting happens um at the beginning of November. Um so we'll see those tracker rates increase but you could say to yourself well actually if they're that cheaper I'd have to have three rate increases in order to be at the same place I was with a with a fixed rate. The other thing about tracker rates as well is that they're often um uh early repayment charge free. So it means that if you're thinking let's say you've got a remortgage coming up and you're thinking I'm not sure I'm not sure what to do because I'm I might be moving in a year's time or I'm gonna start looking at properties. You know, do I lock in because your fixed rate options are pretty much limited on the open market to two years, three years, five years. There are some lenders that do do shorter ones but it's unusual. What you could do is you could move to a tracker rate rather than accepting that you're going to go onto your lender's standard variable rate, which is going to be more expensive and then as soon as you're ready to move you you can leave that mortgage um uh penalty free. So but you have to be not everyone is is willing to accept that level of risk because if there is a shock and we have had some geopolitical shocks and economic shocks in recent years then you you could see those rates um sort of spiral but with those tracker rates because they're penalty free at any point that you feel uncomfortable with that you say right we're going to go into a fixed rate now and that can be done you know very quickly you know fantastic wow this is great stuff today all right moving on to that third avatar if you will or that third individual that we were talking about before which is the individual who requires a remortgage what do they need to know to make the best decision or maybe they don't require remember but they're they're they're thinking well the key the key date is six months six months so as soon as you know when your um your mortgage ends put in the diary six months before that renewal date and a little warning as well which I which I often see people get confused about is that the day that your um the day that your product ends is not two three or five years from when you moved into the property. And that is a bit of a confusing concept you think well I've taken out a two year product I've moved into the property why is it not ending two years later it's because of the way that lenders do their product end dates is that you're typically you might have a two year and three months um on your fixed term. It depends how long it took you to complete in the first place because some people it's really quick you could you know you can be into a new property in one or two months you know for some people I mean if if you're one of the unlucky ones that gets a property into probate or something like that you could be waiting over a year for that to be concluded. So every time you you know pre-moving uh you every time um you potentially move rate pre-completion it's going to be a slightly different end date. So first thing check when's your end date go back six months at that point do get in touch with a whole of market broker very important whole of market um and get them to do a full comparison. What a good broker will do is they'll get you the best possible rate at that six month mark. Now the reason why it's six months is because lenders will give you a six month mortgage offer. So that will tie in exactly with your um your existing product end date. Then you've got security if things get worse because you've secured the rate that was available six months out. So if if things in the world get worse and rates increase then it's great. You've locked in your option if things improve anytime up until your original end date you can get your product moved onto the lower rate it's a very simple process with the lender that you've got the offer with but in in some cases you know I've done I've done re mortgages with new lenders entirely for for clients where they've released a new competitive product. So when just in just when things are going up which they are at the moment when they go down it's it's very busy for the the the the mortgage brokers because you know a good mortgage broker will will move your um move move your clients down and then what will happen around the the free four month mark is that your existing lender will write to you and they'll say your mortgage is coming up for renewal we've got a special offer for you. And sometimes it it is a genuine special offer they offer these retention deals that are um better than um what would the open market rates would be but the brokers can access these as well so you know do do make sure you speech broker because they could they can essentially log into the lender's portal and they can see what they've offered you and they can help advise you on that and process that for you um and so it's always worth checking checking those out um because they might be better than than than what you've secured. If it's a close run thing you might want to consider the the the the product transfer you know when when should I do a product transfer versus when should I do a remortgage so fundamentally a remortgage is going to a new lender. So you've got to get a solicitor involved the lenders will often pay for this as well and they do like free legal packages and things like that. So if you let's say you had to remortgage with a more expensive lender sorry sorry take out your original mortgage with a more expensive lender for whatever reason then it might be that um a remortgage of a new lender is the best thing for you but if you want to avoid all that let's say your circumstances have changed let's say you have just become self-employed you've moved jobs your income has reduced you've just had um a maternity leave a paternity leave you know you've had these things that have affected um your eligibility for a new mortgage it could be you've picked up um um a default some late payments that would make it difficult you can stay with your lender on a on a product transfer they will almost always offer you something so I I've seen people get really worried when things happen in their life and they think I'm never going to be able to get a mortgage or you know I've or let's say I want to go and be a limited company you know that's something that an accountant will say to you they'll say right you should be a limited company now from um but they won't necessarily say what the impact of that will be. And there are lenders that will do what's called day one of being a limited company that's great but some of the high street banks won't but with a product transfer um you can essentially maintain that existing mortgage and they'll offer you there the best deal available. So definitely worth um definitely worth checking um probably one more thing just to mention is that if you are looking at taking out any further or additional borrowing it's a really good time to do that because it keeps all your mortgage parts together at the same time. So you could say right you know let's hope interest rates have decreased for example then you might say well actually I you know I want to redo the kitchen I want to put a conservatory at the back although no one's really doing conservatories these days it's all about the orangery but um uh you know it's a good it's a good opportunity to to do that and you can do that with your existing lender as well although you will be um subject to affordability and credit checks on any you know new borrowing you take out but it's a really good review point to say right let's look at my financial health let's look and see how things are going um um because of the intervals that they um uh appear at but main takeaway do it early six months is your date for the diary Dan you're an absolute finding the knowledge and thank you for coming on the podcast today and spitting the facts like you just did there's so much value in there.

Dr James, 30m 23s:

If anybody wants to reach out to you off the back of anything that you've said today how are they best off finding you?

Daniel, 30m 28s:

So best off getting in touch with me on you know mobile phone, WhatsApp um so my name's Daniel Marks and my phone number is 07880281613.

Dr James, 30m 41s:

Brilliant worth mentioning that you are also in the Facebook group as well uh of course Daniel so uh if anybody do does want to get in touch with Dan for any reason uh feel free to search Dan Marks I believe your Facebook uh Dan abbreviation for Daniel obviously just to they get the right person um if they if they are after you uh search that in the members tab and Daniel should appear.