Backing yourself into a £900,000 acquisition, variable rate and all

A London dentist wanted to acquire a practice outright, goodwill and freehold combined, for over £900,000 on a variable rate mortgage. We stress-tested the numbers against future interest rate rises before the deal completed. The acquisition went ahead with the client fully aware of the risk they were taking on, not just the opportunity.

The Situation

A dentist in London had set their sights on acquiring an established practice outright, goodwill and freehold together, in a deal that came to over £900,000. That’s a serious commitment under any structure. Under a variable rate mortgage, it’s a commitment with a moving target attached, one where the monthly cost isn’t fixed for the life of the loan the way it would be on a fixed-rate deal.

The client’s concern wasn’t whether the deal made sense today. It was whether it would still make sense in three years, or five, if the base rate moved against them. That’s a reasonable thing to lose sleep over when you’re about to commit the better part of a million pounds to a single asset, and it’s exactly the kind of question that’s easy to wave away in the excitement of finding the right practice, right up until the first rate rise lands on the mat and the repayment figure looks nothing like the one you budgeted for.

What We Did

We didn’t just secure the finance and move on. Before anything was signed, we worked through the numbers under a range of interest rate scenarios, not just the rate on offer today, but what the repayments would look like if rates climbed over the life of the loan. The point wasn’t to talk the client out of the deal, or to manufacture reasons for caution where none were needed. It was to make sure that if rates did rise, the practice’s own income, not just its current cash position, could absorb the increase without the client being caught off guard partway through a mortgage term they couldn’t easily walk away from.

That stress-testing changed the conversation from “can we get this deal done” to “can we get this deal done in a way that still works if the next few years are harder than the last few.” Once the numbers held up under pressure, not just under the current rate, the client could commit with a genuinely clear picture of the risk they were taking on, rather than a hopeful one built on today’s rate holding steady indefinitely.

The Result

Over £900,000 was secured for the goodwill and freehold combined. The client moved forward with the confidence that comes from having actually tested the downside, not just priced the upside, and took ownership of a practice that represented a serious step forward in their career, backed by numbers they’d already seen hold up under conditions worse than the ones they were actually facing.

The lesson here generalises well beyond one deal. A variable rate isn’t a reason to avoid a good acquisition. But it is a reason to know, before you sign anything, what the deal looks like if the rate environment stops being kind. Anyone financing a significant acquisition on variable terms should be asking their broker to run those numbers before they ask them to find the money, not after the funds have already been drawn down.

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