Top Slicing Mortgage

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Top Slicing Mortgage

Top slicing your mortgage with Anthony McQuilliam.

Podcast approved by The Openwork Partnership on 09/05/2024.

What is top slicing?

When you are looking at applying for a Buy to Let mortgage, the lender has a certain threshold for how much the rental income needs to be in comparison to how much you want to borrow. 

If the numbers are just not stacking up from a lender’s point of view, the lender can assess your personal income. If it is a high enough amount, they can use that additional income to cover any shortfall in the rental income. In theory you can then borrow a bit more if you really need you to.

Who might benefit from top slicing?

It’s generally people that want to raise additional funds against their property, or they’ve seen a property that they really think will work for them in the long run, but it’s just not stacking up on the lender’s affordability calculations. 

It’s for people who are finding that Buy to Let deals are falling a little bit short when it comes down to the lender’s stress tests, and they have a good personal income. That’s the perfect candidate for top slicing.

How do you calculate top slicing?

It’s hard to say, because every lender calculates the top slicing criteria completely differently. If the deal does fall a bit short, it’s a case of the mortgage broker going through your details and finding out about your personal commitments like credit cards, loans and personal mortgages. 

We also calculate what the rental income would be. Once we put that into the lender’s affordability calculator it will come back with a certain amount, to make sure you can actually top slice. 

Some lenders have a minimum income required for top slicing, while others are just very flexible. As long as there’s enough personal income available, we can use that to help increase the amount they can lend you.

Speak to an expert

Our highly experienced Advisers are ready to help you with either buying or remortgaging a home, protecting your property and lifestyle along with saving you time and effort, ensuring you have a competitive deal right for you.

Which lenders allow top slicing?

Only a handful of lenders will allow you to use top slicing of your income. It’s just a case of making sure that when you’re speaking to a broker that they have experience in this. 

I know the correct lenders, so if your deals are falling short we have the flexibility to potentially try and increase it.

How can top slicing help with affordability on Buy to Let cases?

Top slicing is only for Buy to Let cases. Top slicing is a feature available with some lenders. They will just automatically assess your personal income if the affordability just doesn’t seem to stack up for what you want to do.

What are the advantages and disadvantages of top slicing? 

The big advantage is to help you buy your perfect property, where you feel that you could earn a bit of money in the long run, or there are ways for you to add value and potentially increase the rent over time. But at this point, the rental calculations just don’t stack up. 

Top slicing could be a way of allowing you to get your deal over the line. Another option is if you’ve currently got Buy to Let properties and you want to release money to buy further investments, you could use top slicing from your personal income. Again it may allow you to release more funds from your property. 

The potential cons involved in top slicing is that lenders do stress test Buy to Let deals quite heavily at the moment. If, for example, interest rates increase, they want to make sure there’s enough profit there for you. They’re checking you’re not going to fall behind – and that you’re actually going to be able to make money on your investment. 

If you top slice too heavily and the rates go up, it could put you in a position where you may be paying more on the mortgage than you’re making in profit from the rental income you receive. 

Lenders have those stress tests there to try and prevent that from happening. Taking too much and pushing the payments too high could put you in a position where it’s just not profitable for you anymore.

How can a mortgage broker help here?

We can really help as we have a lot of Buy to Let experience. If you go and speak to a lender directly, they may not allow top slicing and that will restrict the options. You might be told that a deal isn’t doable, or you can’t release the money you need to do what you want. 

Being able to speak to a broker who has access to multiple different products could put you in a position where if one lender doesn’t stack up, there are multiple others that will allow you to top slice if you need to.



Approved by The Openwork Partnership on 09/05/2024.