Top Slicing Mortgage
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Top Slicing Mortgage
Diarmuid Phoenix explains how top slicing works.
What is top slicing?
With mortgages, top slicing is when lenders allow the use of the applicant or landlord’s income, as well as the rental income, towards the affordability for a Buy to Let mortgage.
Most lenders these days will use the rental income primarily for affordability. If this rental income is not quite covering the required percentage of the mortgage payments, lenders may allow personal income to supplement this.
Who might benefit from top slicing?
The type of individuals that might benefit could be, for example, self-employed landlords who already own Buy to Let mortgages, but may have had maybe a slower year income-wise and it’s time to change lenders.
Maybe rental yields in that particular area have fallen and the strength of the rental income for that property is not enough to secure the mortgage they need. In that case, they can use other income to improve their affordability.
How do you calculate top slicing?
Usually the rental income needs to be at least 125% of the mortgage payment. If there’s a shortfall, the lender will allow the use of income to top that up. It’ll vary from lender to lender in how exactly this is calculated and how much income they’ll allow to top it up.
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Which lenders allow top slicing? Are there many?
There’s a number off the top of my head – Virgin Money, Bank of Ireland, Barclays and Accord are all known for top slicing. Not all lenders even do Buy to Let mortgages, let alone top slicing, so it’s obviously right to speak to an advisor rather than start calling up lenders yourself.
What are the advantages and disadvantages of top slicing?
We’ve covered the advantages really, for landlords. The obvious disadvantage, apart from the reduction in lenders, is that an application using top slicing will usually take longer.
Obviously there’s additional underwriting involved in the application, with the usual assessment of rental income, as well as additional checks on personal income that wouldn’t normally be required for a Buy to Let mortgage application. A landlord – and self-employed people in general – then have to come up with their self-employed income documents, which obviously adds to that underwriting process.
You’ve demonstrated how a mortgage broker can help, but is there anything else we needed to know here?
Speak to a broker first. You don’t want to begin a process and end up having to speak to one anyway. So save yourself the time. Many people won’t even be aware of or heard of Top Slicing. So only a broker really can help sufficiently in this situation, in my opinion.
Have a look online to find a broker with relative experience. Like any profession, there’s a varying degree of experience in the market, which is normal. But if you do that, you’ll be in a much better position to find a suitable mortgage product for you.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE MOST BUY TO LET MORTGAGES.