‘Top slicing’ has become increasingly common in Northern Ireland in the last couple of years and a number of lenders are now bringing the option to the mainland.
Both West Brom for Intermediaries and Salt introduced the facility in recent criteria revamps and Jon Burridge, managing director at Quantum Mortgage Brokers, believed it showed lenders were innovating to meet market demands.
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“Most figures put the average loan-to-value (LTV) on BTL at around 75 per cent, but most people don’t walk in with a 25 per cent deposit. Also, with yields in London and the South East very low at the moment, lenders have got to find ways of innovating to help people get into the market. This is an example of such innovation; to provide a solution to the demands of the mortgage market.”
Allowing the use of personal income in the rental calculation can be a way of making up for a potential shortfall and can prove useful in areas where wages are low but rents are higher.
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Mark Sismey-Durrant, chief executive at Heritable Bank, said it was a useful tool if applied sensibly.
“We have been doing this for a number of years but I think you have got to do it sensibly because if you stretch the LTV and the rental cover too much then it doesn’t make sense as an investment.”
Gus Park, head of BTL at Mortgage Express, said it was always good practice to keep BTL self-financing.
“The fact Mortgage Express does not do ‘top slicing’ doesn’t mean it is the devil incarnate, but I would question whether it was appropriate for someone who has more than one property. There is something intrinsic about self-financing BTL and having a rent which covers the calculation with something to spare.”
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