Your income as a dentist can look very different depending on whether you are an associate on a percentage of fees or a practice owner, so the full picture matters when you review your loan. The RBA raised the cash rate by 0.25 percentage points to 4.85% on 3 November, and the ABS reported annual inflation of 4.3% in the year to September. You cannot control the cash rate, but you can review your loan, your budget and your options.
Key takeaways
- Check your new repayment amount and when it starts.
- Ask your lender for a lower rate before you consider switching.
- Compare the total cost of refinancing, not just the new rate.
- Consider a cash buffer in an offset account (explained below).
- Contact your lender early if repayments are getting hard.
What the rate rises mean for your repayments
A higher cash rate generally lifts repayments on variable loans, and the amount depends on your balance, rate and remaining term. The RBA raised the cash rate to 4.85% on 3 November. It was the fifth rise this year, 1.25 percentage points in total, and the highest level since late 2008.
Example: $600,000 loan, rate rises from 5.50% to 6.75%
Item Detail Loan type Principal and interest, 30-year term Rate change 5.50% to 6.75% Extra repayment About $485 a month This is an illustrative example only. Your figures will differ.
Variable loans change soon after the lender passes on a rise, while fixed loans change when the fixed term ends (see our page on fixed rate expiry). Lenders set when a change takes effect, so check the date on your notice.
If you are paid by percentage of fees or practice profit, consider matching your repayment schedule to when that money actually arrives, if your lender allows it.
Know your numbers before you call your lender
Before you call, gather a handful of figures so the conversation is quick and specific. Your lender or broker will ask for most of them.
- Current rate, loan balance and remaining term.
- Estimated property value and your LVR (loan-to-value ratio, which is your loan as a percentage of the property's value).
- Any fixed-rate expiry date.
- The new repayment amount and the date it starts.
Separate your income by arrangement, such as salary, percentage of fees or practice profit. Note whether you are an associate, contractor or practice owner, and keep your AHPRA registration current, as some lender policies depend on it.
Ask for a rate review, or consider refinancing
The quickest first step is to compare your rate with what your lender offers new customers, then ask for a lower one. Our guide to getting a lower interest rate covers the approach.
If your lender will not move, refinancing may be worth a look. A broker can compare options across a panel of lenders, and our home loan refinancing for dentists page explains the process. Costs can include discharge, application, valuation, switching and fixed-rate break fees. Stamp duty does not generally apply to a standard refinance.
Falling property values can reduce your equity and change your LVR, which may affect pricing and LMI. LMI (lenders mortgage insurance) is a one-off cost that may apply when you borrow more than 80% of the property value, and it protects the lender, not you. Less than 20% equity may trigger it. Whether any part of the LMI on your current loan can be refunded depends on the insurer and the lender's policy.
Restarting a 30-year term can lower repayments but increase the total interest you pay. Consider keeping a similar remaining term, or keeping your repayments the same.
Lenders treat employee and self-employed income differently, so practice owners should expect to show business financials. Our self employed loans for dentists page has more detail.
Can dentists avoid paying LMI?
Some lenders waive LMI for dentists, which means LMI would normally apply but is not charged because of your job. Others offer lender-paid LMI, where the loan is still insured but the lender pays the premium, which is reflected in the pricing. Here are some examples. Other lenders may also have options.
Lenders that waive LMI for dentists
- Westpac, St.George, Bank of Melbourne and BankSA: up to 95% LVR for dentists, with no minimum income. It covers owner-occupied and investment loans, with lending up to $5m, or $7.5m in total with a waiver.
- ANZ: up to 95% LVR on new or increased lending for dental practitioners with AHPRA registration, and you need to request the waiver. Because it covers increased lending, it may help with an equity release.
- CBA: up to 89.99% LVR for dentists, or up to 94.99% under its Medico Plus+ offer. It covers owner-occupied and investment purchases and refinancing up to $5m per customer, or $7.5m in total with a waiver, but excludes land and construction. It needs a Mortgage Advantage Package and principal and interest repayments.
- NAB: up to 95% LVR on new lending, or 90% for investment, for dental practitioners. Limits are $4.5m per property and $7.0m in total. It excludes owner-occupied interest-only loans, company and trust borrowers, and some high-risk postcodes.
- Bankwest and People First Bank: both offer LMI waivers at around 90% LVR for dentists. Conditions and limits vary, so ask a broker for the current details.
Who misses out
NAB does not extend its waiver to dental therapists, oral health therapists or hygienists.
How to compare them
- Eligibility differs, so check each lender's registration, income and employment conditions against your situation. Practice owners should check whether a lender accepts self-employed borrowers.
- CBA requires principal and interest repayments, and NAB excludes owner-occupied interest-only loans, so you may need to switch if your loan is interest only.
- A waiver saves the LMI cost, but compare the rate, fees and features too. If an equity release takes your LVR above 80%, check these options before you apply.
Lender criteria change often, and a broker can check which options you qualify for. All lending is subject to credit approval. Our page on LMI waivers for dentists has more background.
Not sure how the rate rise affects your loan?
Have your home loan reviewed by a broker who understands dentist income.
Structure your loan: splits, offsets and equity release
A split loan divides your debt into a fixed portion and a variable portion, and an offset account is usually linked to the variable part. An offset account reduces the balance you are charged interest on while keeping your money accessible. The trade-offs are that money in an offset does not earn interest, offset loans can come with higher rates or package fees, and access to redraw depends on your loan terms.
Some borrowers may be able to increase their loan when refinancing and hold the extra in an offset as a cash buffer. Our equity release loans for dentists page covers this in more detail.
Example at 6.75% over 30 years
Item Before (at 6.75%) After (at 6.75%) Loan amount $600,000 $650,000 Minimum monthly repayment About $3,892 About $4,216 Difference About $324 more While $50,000 sits in a 100% offset, it cancels about $281 a month in interest. This saving falls as the buffer is spent, and the figures are illustrative only.
Before you go ahead, check these points:
- The lender assesses the higher loan amount and may ask how the funds will be used.
- Costs can include refinancing fees, break costs, package fees and offset fees.
- The offset should be 100%, not partial, and correctly linked to the loan.
If the extra borrowing takes your LVR above 80%, revisit the LMI section above. Interest deductibility depends on how borrowed money is used, so speak with your accountant before you borrow for any purpose other than your home.
A buffer is a safety net, not spending money, and it will not fix repayments that are already unaffordable. Make extra repayments only if your household can afford them. For a dentist, a buffer can help if patient numbers or fee income dip, or if a practice owner faces a slow quarter.
Keep practice borrowing separate from your home loan, so each one is easier to follow.
Tighten the household budget
A short review of regular bills can free up cash for higher repayments. Look at subscriptions, insurance, energy and phone plans.
Credit cards and buy now, pay later can add monthly pressure. Debt consolidation may lower repayments but stretch the debt out over a longer period. Build your core budget on a conservative income figure and treat strong months as a bonus.
Fixed, variable or split?
Fixed rates offer repayment certainty, variable rates offer flexibility, and a split loan lets you hold some of each. Fixed loans can carry break costs if you exit early, and they may limit extra repayments. Variable loans often allow extra repayments and offset access, which suits an uneven income, though repayments move with the market.
The next RBA decision is on 8 December. It is wiser to choose a structure that suits your cash flow than to guess at the outcome.
What to do if repayments are becoming difficult
If repayments are getting hard, speak to your lender early, because that is when you have the most options. These steps can help:
- Contact your lender early, preferably before missing a payment.
- Tell the hardship team what changed, how long it may last and what you can afford.
- Ask how any arrangement affects your interest, total cost and credit report. If you are unhappy with the outcome, you can use the lender's dispute process and then contact the Australian Financial Complaints Authority (AFCA).
- Check any income protection insurance, including cover through super, and ask utility providers about hardship options.
- Get no-cost, confidential help: National Debt Helpline 1800 007 007; Mob Strong Debt Help 1800 808 488 (for Aboriginal and Torres Strait Islander people); Beyond Blue 1300 22 46 36 (24 hours).
Plan for time off or reduced chair time through injury or illness, as losing income can hit harder than a rate rise.
Small steps taken early can give you more options later. Book an appointment at a time that suits your appointment book, and bring a recent loan statement, payslips or tax returns.
This article is general information only and does not consider your personal circumstances. All lending, including any LMI waiver, is subject to lender criteria and credit approval. Speak with your accountant about tax.
Frequently Asked Questions
Do lenders count percentage-of-fees and practice income?
Lenders vary in how they treat it. Tax returns, financials and a work history help, as covered in the refinancing section.
I own my practice. Do these LMI options apply to me?
Some options may exclude self-employed borrowers, so check eligibility first. The LMI section shows some of the conditions that apply.
How often should I review my home loan?
At least once a year, and whenever rates change, a fixed term ends or your income changes.
