I am buying into a practice. How does the business loan affect my mortgage?

A business loan taken to buy into a dental practice does not necessarily stop you getting a mortgage, or dramatically reduce how much you can borrow. How the loan is structured makes a large difference, though.

If the borrowing sits inside the dental business and the business makes the payments, some lenders will assess the profit or income available to you after the business has met its loan commitments, rather than treating the whole loan as a personal debt of yours.

Take an illustration – the figure is made up to show the point and is not a client’s. You borrow £300,000 to buy a share of a practice. That is a substantial liability. It is also what gives you access to a profitable business, likely to be generating considerably more than you earned as an associate. A lender that understands practice ownership looks at the overall position. One that does not sees £300,000 of debt and cuts your mortgage accordingly.

It gets more complicated if you have given a personal guarantee, if the repayments are being made personally rather than by the business, or if you bought in recently enough that no full year of accounts yet shows your new income.

That is where lender choice matters most, because different lenders read the same practice purchase very differently. How it was funded, your ownership percentage, your projected income, the practice’s historic performance and your personal drawings all feed into which lender suits the case.

So do not assume that buying into a practice means putting your house-buying plans on hold. It is worth establishing your mortgage position before the practice purchase completes, because the structure and timing of the deal can change which options are open to you.