Top slicing
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Top slicing in buy-to-let refers to a common tactic used by more and more lenders in today’s ever evolving market, when rental income achieved by a property is not sufficient to cover the minimum ICR (Interest Cover Ratio) for the loan amount required.
It denotes the process a lender may take where they assess a borrower’s income, as well as income from rent on the property in question, when deciding how much they will lend. When assessing the borrower’s income, they will look at outgoings and calculate how much surplus a client may have in order to cover any rental income shortfall.
This will usually require the borrower to be able to afford a sum greater than the actual monthly repayment – commonly up to 145%.
Please note: If a joint application is made, both applicant’s income may be assessed, making an application more likely to be successful.
IS BUY-TO-LET TOP SLICING A GOOD OR BAD THING?
Well, that greatly depends on how you look at it.
For medium to high earners with minimum debt, top slicing could allow them to borrow where a traditional, box-ticking approach would not. This is because top slicing concentrates on surplus income. It could also be beneficial for landlords looking to buy higher value properties which may have lower rental yields.
However, things get complicated when it comes to portfolio landlords (Portfolio Landlord). Buy-to-let landlords with four or more mortgaged properties will have their entire portfolio assessed to ensure they can withstand any rental voids, and rate or tax changes.
This could mean that a borrower falls outside the lender’s parameters and their application is therefore declined. As a result, some lenders will not consider a portfolio lender for a top-slicing deal.
Please note: Top slicing is not available to limited companies, HMOs, or first-time buyers.
So, why is buy-to-let top slicing on the rise? Well, many see it as a necessary route after the Prudential Regulations Authority (PRA) (PRA BTL Policy Statement) launched stricter guidelines for landlords in October 2017. (PRA Changes)
IS TOP SLICING RIGHT FOR YOU?
At CDMB, we help you find a competitive deal that works for you. Our advisers will gather information on your circumstances and financial desires, then present you with suitable funding that is bespoke to your needs.
Get in touch today to see how our advisers can help you make that new purchase a reality.
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Our job is to provide you with the expertise and knowledge to find you the most appropriate solution. Whether you’re investing in property or looking to buy your first home, our mortgage advisers can help.
Why Choose Fort Advice Bureau LTD?
- Our experienced Management Team has over 50 year's worth of combined knowledge in the mortgage industry.
- We can quickly assess your needs and compare the most suitable products to find you the most suitable deal.
- With an honest, transparent and consultative approach, we are 100 per cent focused on delivering a first-class service every step of the way.
- We build strong, long-lasting relationships with lenders and are not reliant on a computer-generated response.
Fort Advice Bureau is a directly authorised, independent, Mortgage and Protection brokerage which is simply the best way to operate. We are looking for experienced mortgage and protection advisers across the UK, to become part of our business. You will already be self-employed or looking to become such, no monthly fees, and a competitive flexible package. We are an easy-going and friendly firm which you can confirm by asking any one of our advisers.
Telephone: 01245 203495
Email: FAB@fort-ab.co.uk
