Purchasing a dental practice will take a lot of commitment and time, so you need to ensure that you have everything set in place as early in the process as possible, from having the right career experience to choosing the right practice.
Your career history, like most commercial mortgages in the healthcare sector, will be important to the lender. If you are lacking the experience in the sector, then you may have to consider bringing someone onboard who has the history and put them onto your commercial mortgage.
Are there any processes i’ll need to go through before applying?
If it’s your first dental practice, you’ll be a new entrant to the market, so Care Quality Commission (CQC) will want to speak to you and put you through their application process, whilst Disclosure & Barring Service (DBS) checks will also be taken.
Once you have made the decision to go ahead and purchase a practice, you are going to have to find the right one, and with current demand being much higher than available supply, this can be difficult.
There are also a number of potential pitfalls that you will need to avoid. Whilst lenders are happy to lend to dentists in the profession, if you’ve only ever worked as an NHS dentist and not in a fully private manner, but are wanting to purchase a private dental practice, your application may be looked less favourably upon by lenders. That is why it is ideal if you have experience in what you’re looking to purchase.
What’s the difference between leasehold and freehold?
You can purchase a dental practice on either a leasehold or freehold basis, so you will need to weigh up the pros and cons of both before you begin looking. Which one applies to you will depend on your affordability, though a freehold will be classed as ‘tangible security’ by the lender, so that option will be looked upon more favourably by them.
If you want to purchase a dental practice on a leasehold basis, you will need to pay particular attention to the length of the lease, as this is the period of time that the banks will lend to. You will also need to work out the best acquisition structure for your dental practice.
If you get this wrong, you could end up paying more in solicitors’ fees to amend it and you may find that you are unable to hold an NHS contract within the structure that you have selected, which could lead to even more delays.
To minimise any other delays, your Care Quality Commission application will need to be submitted usually 10 weeks before the proposed completion date of the mortgage to the standards accepted by the CQC. The best advice we can give is to start the process for the CQC and your DBS checks as soon as your Heads of Terms have been agreed with the vendor.
What sort of due diligence will be involved?
The responsibility to ensure that the practice is viable and without problems that could affect the running of the business in future years is mostly out of your hands. But that doesn’t mean you can sit back and relax.
Make sure that you review all of the information that you get from the seller’s team and go over them with your solicitor (who should be a dental specialist) and raise any issues that you pick up straight away. This process can take a long time, as there is a lot of documentation gathering involved, so remain patient.
What sort of rates will i be looking at?
Like any mortgage, it varies; but you’ll be looking at a starting point of around 2.1% above the Bank Base Rate with arrangement fees ranging from 0-2%. The maximum term that most lenders will consider will be between 15-25 years and interest-only terms tend to be available on a 6-12-month basis with loan-to-values varying between 55-70%. Though, if you have enough supporting security, you may be able to borrow more than 70%.
At The Mortgage Hut, we have dental practice mortgage experts who will be able to assist you with indications of deposits that you will need, how much work you will need to do and will help you secure funding against the practice.
Our advisers will help your acquisition run as smoothly as possible and will take the stress out of the application for you. Contact one of our dental practice mortgage experts below to get your application rolling or if you have any further questions.