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Imagine you’re approached by a client who’s looking to secure a mortgage for a new buy to let property they’re hoping to purchase. They have a successful career as a barrister in London which has enabled them to build up a small portfolio of two rental properties in the city which they run as a personal ownership landlord.

They believe the new property has real potential for high capital growth and they expect it to generate £1,400 in rental income each month. They’re looking to take out a 2 year fixed rate 75% LTV rate mortgage at 3.59% to enable them to buy the property.

As an experienced broker, you suspect the client may struggle to secure the loan size they need as they’re a higher rate taxpayer and therefore need the rental income from the property to cover 140% of any stressed mortgage rate. You believe the expected rental income may fall short of what’s needed to meet ICR requirements.

Your suspicions are proved to be correct when you start looking for suitable products and find some lenders require a rental income of £1,750 a month to satisfy the full ICR – a shortfall of £350.

Fortunately, you know that ModaMortgages provides more affordability options. Take our top slicing feature, for example, which is available to non-first-time prime clients across all our buy to let products, including limited company applications, and allows clients to use surplus earned income to make up an affordability shortfall.

With top slicing, as long as the rental income covers 110% of the unstressed mortgage payment, you can use surplus earned disposable income to make up the rental shortfall to satisfy the original 140% stressed value.

Going back to our scenario, when we carry out affordability checks, we find that while the £1,400 rental income doesn’t cover the standard ICR, it does cover an ICR of 110% when stressed at the product rate, so the application qualifies for top slicing.

After looking at your client’s income and expenditure in detail, we find they have around £650 in surplus earned income each month which when added to the £1,400 rental income gives us a total of £2,050, more than satisfying the £1,750 needed for the original ICR. It means we’re able to offer them the mortgage they need to purchase the new rental property and add to their small but growing portfolio of rental homes.

Interested in finding out more about how our top slicing feature could help your clients? Get in touch with us today by calling 01978 803333 or contact a member of our sales team who’ll be more than happy to show you how it works.