It is available to non-portfolio landlords with minimum income of £100,000
Buy-to-let lender BM Solutions has launched top slicing for qualifying applications, enabling landlords who have a shortfall in their required lending to use a proportion of their earned income when the rental income for the BTL property is not sufficient to hit the standard rental cover ratio (RCR) calculation.
The top slicing feature is not available for portfolio landlord and Let to Buy customers. It requires a minimum income of £100,000 per application, with PAYE, self-employment, pensions, and profit from UK land and property all accepted.
The stressed RCR boundaries were set at a minimum of 125% and a maximum of 145%. Outside of these limits, the standard RCR calculation will be offered.
“We recognise the needs of landlords and brokers and have made these changes to support them,” stated Leigh Church (pictured), head of BM Solutions, which is part of Lloyds Banking Group. “We continue to innovate and flex our approach and products to support the market while maintaining robust controls on affordability.”
Brokers asked by news agency Newspage commended BM Solutions for broadening their criteria to aid more buy-to-let borrowers, but admitted the criteria could be restrictive to make a bigger impact.
“I think this delivers a hugely positive message to the much beaten-up buy-to-let market,” commented Richard Campo, founder of Rose Capital Partners. “From looking at the criteria, there are quite tight parameters, and it clearly favours higher earners, but if you do tick the right boxes that can mean a 16% increase on the loan you could have got with BM Solutions previously.
“So, while niche, any help to the buy-to-let sector should be welcomed. It is restrictive criteria such as the stress tests, among many other issues, that have put off a lot of landlords and resulted in a lack of suitable rental property and record high rental incomes being charged. So, while this isn’t a game changer, it is a step in the right direction and BM Solutions could be applauded for it.”
Anil Mistry, director and mortgage broker at RNR Mortgage Solutions, said the move “is truly fantastic news for borrowers who find themselves in this income bracket.”
“Many of these individuals have likely felt the weight of stringent stress testing, particularly considering their higher tax rate bracket,” Mistry added. “Consequently, the emergence of another lender offering top slicing is nothing short of a boost for them.
“What’s particularly encouraging is even though a minimum income of £100,000 is needed, this income threshold can be met by combining the earnings of the first two borrowers. It’s worth contemplating that this minimum income requirement could potentially be lowered in the future, making it even more competitive with other lenders who have already embraced similar approaches.
“With any luck, we could witness a growing number of lenders embracing top slicing in the near future, offering borrowers greater financial flexibility and peace of mind for existing landlords who have deals ending soon.”
Read our guide to BM Solutions for intermediaries here.
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