Portfolio landlords: what is ‘top slicing’?

With the cost of living at an all-time high, many landlords may be a little tentative about making the move to expand their portfolios with another buy-to-let mortgage. Stricter affordability rules after all aren’t making life easy for those looking to take advantage of falling mortgage rates. Yet portfolio landlords or those with a hefty personal income of their own may just have a lifeline.

‘Top slicing’ is an option that’s getting more and more popular. In this blog post, we take a closer look at top slicing, how it’s making mortgages more affordable and accessible, and which landlords could benefit.

What exactly is top slicing?

Top slicing is when a mortgage lender takes other sources of personal income into account to determine whether you are a suitable candidate for a buy-to-let mortgage.

As the name suggests, buy-to-let applicants would ‘top up’ the income generated by property using their personal income to show that they can afford to keep up with monthly mortgage repayments.

Why is top slicing so popular?

Top slicing is no new thing. It was first introduced back in 2017 in response to buy-to-let tax increases (initially announced in 2015) and stricter affordability checks. With landlord profits under increasing pressure, with fewer investors entering the market as a result, top slicing provided a vital lifeline for wealthy or experienced landlords and still does to this day.

Top slicing is beneficial for tenants too, with landlords who apply for buy-to-let mortgages via top slicing less likely to increase rental costs to unaffordable levels – which is great news considering the current climate!

Is top slicing suitable for me?

Top slicing isn’t for everyone. Only wealthy or experienced landlords with a futureproof supplementary income should use the tactic to secure the buy-to-let finance they need to add to their portfolios.

Here Suffolk Building Society explains more about who may benefit from top slicing during their upcoming buy-to-let mortgage application:

“Top slicing is usually suitable for medium to high earners who have minimal debts. Retired people with a sizable pension income may also be eligible for top slicing. Top slicing may also appeal to those looking to purchase a property in an area with higher than average property prices, as they may not be able to set rents at a level to meet ICR criteria.”

If you are unsure about the stability of your future income, you should not use top slicing to proceed with your buy-to-let mortgage application.

I’m a portfolio landlord, should I top slice?

Portfolio landlords looking to use their existing rental income to secure their next investment should also treat top slicing with caution.

To proceed with your application, your portfolio of properties would need to be rigorously evaluated to confirm any surplus rental income that you could use to ‘top up’ the income generated by a new property.

To ensure that top slicing will work for you and your circumstances, we recommend speaking to an independent mortgage advisor. Our mortgage specialists are on hand to find you the right product. Speak to an expert today to get started.