What is top slicing?
Specific to buy to let, this means using your clients’ personal income to ‘top up’ a shortfall in Interest Coverage Ratio (ICR). By taking this additional portion of personal income into account during affordability calculations this may enable them to access the loan amount required.
This is not just limited to UK-based applicants, as for UK nationals seeking an expat buy to let deal we’ll consider top slicing where the personal income is paid in GBP.
Who qualifies for top slicing?
We’ll consider top slicing on our buy to let discount rate products not meeting ICR at 145%, within the following lending criteria:
- ICR must be a minimum of 125% of pay rate before top slicing can be used
- Applicants will need to go through a full affordability calculator similar to our residential affordability calculator – any excess income can then be used to support the ICR shortfall on the BTL
- Applicant(s) must have a minimum personal sole income (excluding rental income) of £40k per annum or for joint application a minimum personal income of £65k
- Maximum age of any applicant is 80 years at the end of the mortgage term
- If the term takes the applicant beyond the age of 70 (75 if self employed non-manual) then a second affordability calculation based on retirement income is required. The retirement income must still meet the minimum income requirements of £40k sole or £65k joint per annum
When submitting top slicing BTL cases to us, please ensure you use the specific top slicing product.
Want to know more or have a case in mind? Give us a call on 0330 123 1073.