Commercial investment mortgage for dental practice

In mid-February this year, a broker approached us looking for help in sourcing a commercial investment mortgage for his client - a dentist, property investor and high net worth individual in his 60s.

For many years, the client had owned two successful London dental practices, the premises of these were both financed under a single loan facility with a leading high street bank. Recently, the client had sold the NHS contract and goodwill of one practice (not the premises) to another dentist for a healthy consideration, then leased the property to the new owner on a 10-year FRI term at a rent of £34k pa.

This sale meant the client would be able to repay the existing loan, own his retained dental practice outright and refinance the other premises onto a commercial investment mortgage.

The broker approached us for help because of our expertise in negotiating commercial deals. In particular, the client was looking for a lengthy repayment term, which can prove tricky to organise for older borrowers.

I arranged to meet the client at the premises where he had sold on the dental practice. Whilst the building was in good shape generally, as the new landlord, the client had agreed to make some improvements for his tenant. These costs would need to be accommodated within the loan facility.

Returning to the office, I contacted a lender which I thought would be able to offer the sort of terms the client was after. Submitting the appropriate details (including a mortgage application, the last two years of accounts for the trading business and copies of six months' business and personal bank statements), I was able to obtain an Agreement in Principle just 48 hours later. Thereafter, a comprehensive investment valuation was instructed which took about two weeks.

In April, the client received a formal mortgage offer consisting of a 14-year capital and interest repayment facility, however crucially, the monthly payments were calculated based on a 25-year term. At the end of the 14 years, the client will either sell or refinance to make up the shortfall.

The client was more than satisfied with these terms and accepted the offer. Funds are expected to be drawn down by July. Here are the details:

Property Details

Property value: £730,000

Loan amount: £354,375

LTV: 49%

Rate: Bank Rate + 3.70% (3.95%)

Term: 14 years capital and interest with repayments calculated at 25 year terms.

Borrower: Individual

Mortgage payment: £1,860 pcm

Lender arrangement fee: 1.5% (£5,250)

Rental income: £2,834 pcm

Gross yield: 4.4% pa

Consultant: Andy Elley, 01732 471644

9th May 2017