Cutting the cost of property: £600,000 funding to buy medical premisesPublished on 7th February 2020 2020-02-07T12:00:00+00:00 - Last update on 8th February 2020 2020-02-08T14:16:12+00:00
Whether you are a GP or a consultant, buying your premises could be a sound investment for the future of your practice. But costs may be high - because you must have a surgery that meets your own, and your patients' needs.
Your patients will need a central location that is easy for them to reach by public transport as well as by car. Plus you will need parking for yourself and your staff, even if you are not providing it for patients.
You will need ample space for consulting rooms, waiting rooms, nursing stations, administrative staff and storage. The overall space also needs to be suitable for patients who cannot manage stairs.
In short, you need an environment that is appropriate for a clinical practice.
The size and location requirements of your surgery will mean costs will be high. Getting the most competitive funding for your premises is, therefore, vital for the profitability of the practice.
We recently helped arrange £600,000 funding to help an established doctors practice cut the cost of buying their premises.
Our client was a three-partner doctors practice based in a large town in the south of England. Their surgery was in an ideal position close to the town centre, with council car parks providing easy patient parking, and bus stops nearby.
The partners were buying their premises with the help of a loan from a high street bank that had been negotiated more than 15 years ago, and with around £600,000 remaining.
The partners realised that they had built up a good deal of equity in their surgery, helped by rising property prices - and that rates, in general, had fallen since they arranged the loan - which was at a rate of 6.00%.
They wanted to cut the cost of their Commercial Mortgage repayments.
What is a Commercial Mortgage?
Commercial Mortgages are among the most common forms of finance used to buy commercial property.
They operate much like a residential mortgage, with a large loan secured on the property itself - but with an important difference. While residential mortgages are designed as a standard offering for a mass market, all Commercial Mortgages are arranged on an individual basis. This means that lenders will look at the practice as a business, and scrutinise its accounts and forecasts to ensure that its long-term prospects are positive. A good trading history and good prospects for the future may help a borrower secure preferential rates.
For medical professionals with their own practice, it may be particularly simple to secure a Commercial Mortgage at a very attractive rate for two reasons. Lenders are very sympathetic to the sector, which they see as very stable and safe - and because repayments can be arranged to be covered by notional rents.
Owner-occupied businesses can normally get a maximum loan-to-value of around 80%, but medical professionals may get 100% funding for their surgery premises purchase.
This means that - with the help of the Rangewell team - it may be possible to secure a Commercial Mortgage at a preferential rate. This ability to secure preferential rates can often mean that remortgaging an existing property can significantly reduce monthly outgoings.
Why there are savings for medical professional remortgaging
We saw that remortgaging could save our clients money for four reasons:
- The value of the property had appreciated significantly, allowing for a better Loan to Value ratio
- Interest rates, in general, are at close to record lows
- The medical sector can expect particularly favourable rates
- A longer term would allow smaller repayments
- It would allow us to use our expert knowledge to find the most competitive quote across all lenders
We looked at the figures and searched our lenders. We found a high street bank who could offer a remortgage at 2.5% above the base rate. In addition, the new lender was able to spread the loan over a 20-year term, further reducing their monthly outgoings.
£600,000 at 6.00% above base rate currently 0.75% with a remaining term of 15 years
Existing monthly repayments £5,309 Annual cost £63,708
New monthly payments:
£3,403, 2.50% above base rate (currently 0.75%) over a slightly longer term of 20 years
Monthly saving £1,906
Annual saving £22,872
At Rangewell, we can help medical professionals - and others - find better answers to all their property funding needs. Our experts will find the most appropriate solutions while our network of contacts and our unique online tool let us find the most cost-effective rates.
That means, whatever the need, a call to us can save you money, and help your practice do more. Our service is independent, fast and absolutely free. Simply call us on 020 3637 4150 or email us.
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