You may have taken your loan out some time ago, and be content in the fact your practice can comfortably afford the repayments. You will be familiar with the various loan types on offer but may not have considered that when you accepted your loan offer some time ago that market may have shifted and the benefit of what you are receiving at the moment is not the necessarily the best you could get now. If you are considering readdressing your situation, take heed, as there are a number of additional considerations that you must make in these circumstances.
Consider all of your options
First of all, consider all of your options, as there’s no point in refinancing unless it’s going to benefit you in the long-term. Assess the situation thoroughly to ensure the rate and terms you are paying are the most competitive on the market. It may be that your existing arrangement is favourable compared to other available deals currently out there, in which case, your best bet would be to leave your loan as it is, but if you don’t check what the market is doing you will never know. You may have borrowed from the bank 2 years ago at 3.5% with a heavy amount of security, or if the capital you borrowed from the bank was originally obtained through the Enterprise Finance Guarantee (EFG) scheme with a 2% premium, , refinancing would save you a considerable amount of money if the size of lending boasts a 2.3% interest rate margin with no security.
If you are considering refinancing to release equity for another purchase, saving money might not be your primary motivation. But is important that you consider the amount you will need to pay back on your existing debt as well as the new debt you are accruing so it is important that there is enough equity available for a lender to consider. Equally the banks will want you to demonstrate what you require the funding for, they will not just release funds for a rain day. If your loan is in its infancy it’s probably not the best time for you to be looking for a refinancing arrangement. Firstly, because the market is unlikely to have experienced changes drastic enough to make a difference to your loan, and secondly because a new lender will want to see stability in your repayments and business accounts. Ideally, you should leave it at least two to three years before considering refinancing if you want to get the most from a deal, but this isn’t a hard and fast rule. What’s more, there can be penalties for exiting the arranged payment schedule early, though any savings you make from a reduction in interest rates/terms may well offset this.
The Current Market
As for how the current market is likely to affect your ability to refinance, the banks are certainly far more robust compared to post 2008 – consequently, if you took on debt after this time, you might find that you’d get a better repayment deal on the current market, or even just release some of the security the bank has a charge over for the remainder of your loan. Over the past 12 – 18 months interest rates have risen to counteract the drop in base rate to 0.25% , though banks are still lending to the dental sector with some offering up to 100% for certain deals. However, it is all about approaching the right manager at the right bank, which when done independently, does not always produce the best results. A specialist finance broker like DE Finance is the best option for securing optimum lending, as the team is able to use its expert knowledge of lenders to ensure that your application ends up in the right lap.
The other factor that might impact your decision to refinance is Brexit; though as it stands it is still unclear how and to what extent our departure will influence banks’ willingness to lend. True, the value of the Great British Pound has fluctuated extensively since the referendum result was announced back in 2016, but it is still too early to accurately predict what will happen once negotiations are complete. Saying that, it would be naïve to think that Brexit won’t affect us at all over the coming years, so unless you want to get caught out, be sure to keep a close eye on changes in the market.
Consult a specialist
Above all else, make sure that you consult a specialist adviser before approaching a lender to discuss whether refinancing would be more beneficial than your current financial deal. Not only will a dental specific broker have a better understanding of present market trends than an individual bank, but they will also be able to navigate you through the process according to your personal financial needs and goals. Indeed, with lending criteria subject to continuous change, there’s no telling if what lenders want today will be what they want tomorrow; only with expert help can you hope to come out on top.