Funding the bricks: buying the freehold you trade from, purchasing the premises you currently lease, or refinancing what you already own.
Owner-occupier or investment
The distinction matters more than most practice owners expect.
An owner-occupier mortgage is assessed primarily on your practice’s ability to service it, and typically attracts better terms. This is the usual route where you trade from the building.
An investment mortgage is assessed on rental income and the covenant strength of the tenant. If you hold the freehold personally or through a separate company and lease it to the practice, this is the structure, and a dental practice on a proper lease is a strong covenant.
Which applies depends on how you hold it, and that decision has tax as well as funding consequences. Worth taking accountancy advice alongside the funding conversation rather than after it.
Indicative terms
- Commonly up to 75% of market value for a trading healthcare business
- Terms typically to around 25 years
- Assessed on practice profitability for owner-occupier, or rent and covenant for investment
- Semi-commercial pricing where there is a residential element. Most lenders define semi-commercial as mixed use with residential above, so a standalone practice is fully commercial
Run your own figures with the commercial mortgage calculator.
Buying the freehold you currently lease
This is one of the better decisions a practice owner can make and one of the most commonly deferred. If your landlord is willing to sell, you convert rent into equity, remove the risk of a lease not being renewed, and add an asset that supports future borrowing.
Lenders generally view it favourably: you are already trading successfully from the building, so the occupancy risk they would normally price for does not exist.
Refinancing what you already own
Worth reviewing if your current facility was arranged some years ago, if you are paying a rate set at a different point in the cycle, or if you want to release equity to fund a second site or an equipment programme. See dental practice refinance.
Check early repayment charges on the existing facility before you get too far. On a commercial term loan they can be substantial enough to change the arithmetic entirely.
What lenders look at
- Practice accounts and current management figures
- The valuation, and whether the building has alternative use if the practice ceased
- Your CQC registration and inspection standing
- The income mix and the stability of the clinical team
- Any existing borrowing, including goodwill facilities from a purchase
Common questions
Can I buy the freehold and the practice together?
Yes, and it is common. The goodwill and property elements are funded on different terms within one transaction. See our page on dental practice purchase.
Is a commercial mortgage regulated?
Commercial mortgages on business premises are not regulated by the Financial Conduct Authority. The exception is mixed-use property where you or a close family member live, or will live, in the residential part and it makes up 40% or more of the property. That can be a regulated mortgage, which we do not arrange. We will tell you at the outset if that applies.
Can I hold the property in a separate company?
Yes, and many practice owners do for succession and tax reasons. It changes the assessment from owner-occupier to investment, so tell us the intended structure early, because it affects which lenders are appropriate.
All figures are indicative and subject to lender assessment, your circumstances, valuation and prevailing market conditions. Commercial mortgages and unregulated bridging loans are not regulated by the Financial Conduct Authority. Property offered as security may be at risk if you do not keep up repayments.