'Top-slicing' and longer-term fixes used to secure larger buy-to-let mortgages

by Aaron Strutt

Jan 21 2017

If you are looking for a more generous buy-to-let rental calculation, Trinity may be able to help.

Our expert advisers have access to a host of lenders providing larger buy-to-let loan sizes through ‘top-slicing’ and longer term rates.

Following changes introduced by the Prudential Regulation Authority (PRA) at the start of this year, some buy-to-let lenders have completely changed the way they calculate maximum loan sizes. The idea of the change is to reduce loan sizes and help more first-time buyers onto the property ladder.

Better rental calculations

There is a huge amount of competition in the buy-to-let market and the banks and building societies are interpreting the PRA’s new rules differently.

As a result, a selection of lenders offer more attractive rental calculations when landlords lock into a longer term fixed rates. 

If a property generates £1,750 rental income per month, it may be possible to secure larger loans through some specialist lenders.

If you were to apply for one of Santander’s buy-to-let mortgages, a rental calculation of 145 at 5.5% would apply. With £1,750 rent each month this would mean the bank would lend around £263,322.

Other lenders may well offer much more generous buy-to-let loan sizes, for example, Accord Mortgages could offer up to £311,111 and Fleet Mortgages could provide up to £336,000. Also, Newcastle for Intermediaries may lend up to £362,068, and Paragon Mortgages could lend up to £420,000 (to basic tax rate payers).

Personal income used to ‘top-slice’ application

Some lenders can use an applicant’s personal income as well as the rent to provide larger mortgage loans.

Trinity Financial has access to a host of banks including Barclays for Intermediaries and Metro Bank to secure more generous mortgages for those with larger incomes.

The banks use ‘top-slicing’ to assess personal incomes along with the rent to boost the loan sizes. The application has a larger chance of going through if you have lower credit commitments and monthly outgoings.

Better calculations for remortgages

Some of the lenders provide more generous rental calculations when landlords are remortgaging and they do not require any additional borrowing.

There is one lender is particular using the calculation of 125 at the pay rate regardless of the applicant’s tax status. If a property generated £1,750 each month, the maximum loan size could as high as £481,875.

Comment

Aaron Strutt, product director at Trinity Financial, says: “Many of the lenders are using completely different rental calculations to work out the maximum loan size, so the buy-to-let market is a lot more complicated than it used to be.

“Landlords will really need to search the market to secure the largest loan at the most competitive rates. Even if a lender is offering a super-cheap rate, there is no guarantee you are going to qualify if the rental calculation is tight.”

For help to secure a more generous buy-to-let mortgage, call Trinity on 020 7016 0790.