Newsletter – Summer 2016 – Part 2

By: | Tags: | Comments: 0 | August 15th, 2016

“I believe in Miracles!”

We, or at least my colleagues on the Chantler Kent mortgage team, have had one or two problems securing some clients a mortgage recently. Yes, this is partly due to increased compliance and regulation as well as the tightening of lenders’ terms and conditions. But it is also naivety on the part of our applicants and the non-disclosure of crucial information.

Miracles we can do but the impossible takes a little longer. A young dental practitioner was referred to me by one of my ‘oldest’ clients for a mortgage which, on the face of it, seemed fairly straightforward, especially as she was earning £80,000pa as an associate. However, apart from not being on the voters roll, it appears that she had spent the last twelve months applying for credit in one shape or form. These factors coupled with the fact that not all her residences had been disclosed on the form led the lender to decline her application. As she didn’t have any accounts, there was no other lender prepared to assist.

We have also had difficulties whereby clients with gold star credit ratings are declined. This is often due to the confusion between credit card debts and loans for business but which are in one’s own name. Most practitioners are sole traders or expense sharing partners simply with a trading style, such as ‘Smiley Dental Practice’. However, equipment loans and credit card purchases are invariably made in one’s own name. These must be disclosed to ensure you are not disadvantaged.

Another of my longstanding clients, a partner in a large NHS dental practice, actually confessed to not knowing that if he didn’t at least pay the minimum off his credit card by the due date each month he was defaulting on the terms of the agreement and was likely to suffer from an adverse credit rating as a result – a bit of a problem as he was considering re-financing the practice!

Chess

Finance is like a game of chess, it pays to think a few moves ahead:

Borrowing

If you are contemplating taking out a loan for a car or other short term purchase and are also considering applying for a mortgage or re-mortgage in the near future, then it would be advisable to wait until the larger funding requirement is secured. The mortgage lender will take into account all your other debts and commitments when assessing affordability, whilst the secondary lender will consider you a stronger and more reliable bet if you have a mortgage.

Insurance

When applying for life (or critical illness) insurance, be wary of individual insurance companies’ underwriting limits. Try not to expose yourself to onerous and unnecessary medical intrusion such as blood tests, urine samples or medical examinations. These may reveal more than you would like or even be aware of!

Endeavour to secure your insurance with the minimum of fuss because, if you register a high blood pressure reading or they find blood in your urine, the terms of the insurance will be less favourable, if they are offered at all. All companies have limits above which will automatically trigger more detailed investigations. The last thing you want is to have to pull out of a practice purchase just because you can’t secure the insurance which was a condition of the bank loan.

For advice on this and a strategy to avoid being disadvantaged, please contact me by email or telephone.

Stats are Facts

Statistics drive premiums. It is a myth that critical illness insurances do not pay out. Claims are increasing year on year which is why premiums go up. With the majority of companies now offering guaranteed premium contracts, it is prudent to secure your insurance whilst still in good health and for as long as possible. Remember, you are much more likely to suffer a serious illness than to die.

Property Funds

There has been a lot of talk about property prices and property funds in the media lately. Property is an asset class like any other and should be considered as such. Values fall as well as rise. The major problem is that it is an illiquid asset, ie not easily tradeable.

Any investment should ideally be made with a medium to long term approach so that any short term fluctuations in value are of no significance. One negative aspect of property investment is the loss of flexibility; you are sacrificing accessibility as the money is tied up and will not be available for any other purpose. Consequently, one should only invest what one can afford to commit in such a way.

Investment Returns

On the subject of investing, the portfolios within the Chantler Kent Wealth Management Service which include pensions, ISAs and general collectives such as unit trust and OEICs (open ended investment companies), have achieved solid returns over the past year. Things were looking a little less rosy at the turn of the year but, at any given moment, prevailing factors can have a negative impact in the short term.

The Beaufort Equip portfolios turned in good performances but they were more heavily exposed to equities than we felt was prudent bearing mind the economic volatility. Moreover, they wanted to charge us more for the privilege of using their service. The decision to replace Beaufort with Financial Express (FE) has been rewarded by much less volatility and excellent relative returns, especially bearing in mind the instability of global markets.

The Chantler Kent Balanced Portfolios have achieved between 9% and 14% after charges over the past year!

MediClub is the longest established independent financial advisory service in the medical and dental sector having been set up by Andrew Howard in the 1970s. The service is supported by fully qualified and authorised advisers within Chantler Kent Investments. The observations in this newsletter should not be construed as advice or specific recommendations. One’s individual circumstances always need to be assessed prior to taking action.

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