Commercial Mortgage for Dentist Buying Surgery

The situation

A principal dentist in the Midlands had operated their practice from leased premises for eleven years. When the building's owner approached them with a proposal to sell the freehold, the timing was right. The practice was well established, the patient list was stable, and owning the building outright would eliminate rent exposure, provide an asset on the practice's balance sheet, and give the dentist control over the premises for the long term.

The asking price was £1,082,000. The dentist had equity available to fund a deposit of around 28%, bringing the loan requirement to £780,000. On paper, the numbers worked. In practice, the application presented challenges that a standard commercial lender would not be well placed to handle.

Healthcare practices sit in a specific segment of the commercial mortgage market. The income is a blend of NHS contract revenue and private fee income, the property is specialist-use, and the valuation methodology differs from standard commercial property. Getting this case to the right lender, presented correctly, was the difference between a straightforward approval and a frustrating series of declines from lenders who had no framework for assessing dental practice income.

The complications

The practice generated income from two sources: NHS contractual income tied to a contract with the local Integrated Care Board, and private dental fees charged directly to patients. Together, the two streams produced a strong EBITDA figure. The challenge was that mainstream commercial lenders with no healthcare specialism tend to discount NHS income, treating it as contract-dependent rather than reliably recurring, and apply conservative multiples to private income given the perceived volatility.

The valuation was also a factor. Dental surgery premises are valued on a combination of bricks-and-mortar value and trading value. A standard commercial surveyor unfamiliar with the healthcare property market can produce a valuation that fails to reflect what the premises are genuinely worth to a trading dental practice. We needed a lender who instructed valuers with a healthcare remit.

The 15-year term the dentist wanted also required a lender comfortable with longer commercial terms. Some commercial lenders cap owner-occupier terms at 10 years. The longer term meaningfully reduced monthly repayments and improved the DSCR calculation, making the case more straightforward to approve.

How we structured it

We identified a specialist commercial lender with a dedicated healthcare lending team and a track record in dental practice finance. The lender used a healthcare valuer, which produced a robust valuation figure that supported the 72% LTV. They were also comfortable assessing the blended NHS and private income on its merits, applying a DSCR test that reflected the stability of the practice's revenue rather than penalising the NHS contract element.

The application was built around a clear presentation of the practice's financial position: three years of accounts, the NHS contract documentation, a breakdown of the patient list size and private fee schedules, and the dentist's personal financial position. A well-packaged application to the right lender moves considerably faster than a poorly packaged one to the wrong lender, and we had seen enough healthcare cases to know exactly what this lender's credit team would want to see at the outset.

The loan was structured as a capital repayment commercial mortgage over 15 years at a fixed rate for the initial period, with a drawdown timed to coincide with the legal completion of the freehold purchase.

Dental practices have a specific income profile that most commercial lenders do not understand. The right lender, presented with the right information, made this a straightforward case.

The outcome

The £780,000 commercial mortgage completed on schedule. The dentist purchased the freehold of their surgery premises at 72% LTV, exiting a lease that had cost them more than £60,000 per year in rent. The capital repayment structure means they are building equity in the property from month one, and within 15 years the premises will be owned outright.

The practice balance sheet now carries a property asset. For a dentist considering a future sale of the practice, practice goodwill and property freeholds are typically valued and transacted separately, which provides meaningful optionality when that decision is made.

The NHS contract income, which some lenders had viewed as a complication, was correctly assessed by the chosen lender as one of the most stable revenue streams in the healthcare professional market.

What this demonstrates

Dentists buying their own surgery premises are a well-defined borrower type, but the commercial mortgage market is not uniformly accessible to them. The combination of specialist-use property, blended healthcare income, and NHS contract dependency means that most high street commercial lenders will either decline or offer terms that do not reflect the strength of the underlying business.

Accessing the right part of the market requires a broker who understands how healthcare commercial lending works, which lenders have dedicated healthcare teams, and how to present a dental practice's financials in the way those lenders expect to receive them. The DSCR test is straightforward once you know how to calculate it correctly and which income streams a given lender will include in full.

FD Commercial arranges owner-occupier commercial mortgages for healthcare professionals from £250,000. We work with lenders who have dedicated healthcare lending programmes and understand the NHS income model. If you are a dentist considering purchasing your surgery premises, the first step is a conversation about the numbers, not a formal application. Call us on 03300 100315 or visit our commercial mortgages page.