Take a slice off the top with The Cambridge
15 January 2019 • Products & Services
Reporting from The Intermediary Mortgage Lenders Association (IMLA) shared that after Buy to Let (BTL) lending fell by 12% in 2017, despite the adverse tax changes they expected to see a recovery in 2018 and 2019. The market has seen a number of incentives launched to support this predicted growth, including cash back, free valuations and reduced early repayment charges.
However applicants are still finding it hard to achieve the loan-to-value they require, predominantly due to the stricter affordability rental coverage rules introduced in 2017. For many the problem was a low rental yield, where their property had increased in value and the rent had not. For example, an applicant looking to borrow £300,000 (75% on a property worth £400,000) with monthly rent of £1,719 would have previously met the affordability assessment - now they require a rental income of £1,925.
The Cambridge along with many other regional lenders looked at how underwriting criteria could be enhanced to support the challenges these landlords were facing, the solution – ‘Top Slicing’.
So what is Top Slicing? It’s actually quite simple… using the borrower’s personal income to cover any shortfall in rent which is needed for the borrower to obtain the loan amount they require.
Although not suitable for portfolio landlords, it is ideal for borrowers with 1-3 mortgaged BTL properties.
There’s no minimum amount required to Top Slice – whether your client’s monthly income is short by £3 or £300, all we request is an Income and Expenditure form is completed to demonstrate if the Landlord can afford to cover the monthly repayment in addition to their monthly expenditure.
The expertise of our Business Development Team means they recognise when Top Slicing may be the right solution for your client, pre-assessing if the mortgage is affordable and whether Top Slicing is achievable before the case even meets our Underwriting Team. We currently offer Top Slicing to intermediaries registered with Legal & General, Sesame & PMS.
Top Slicing is just one of many initiatives that landlords can benefit from at The Cambridge, we offer an income coverage ratio of 125% on like for like BTL remortgages, a stress rate of 4.49% on our 5yr BTL Fixed Rate mortgage and this is all supported with no upper age limit across our mortgage range.
We know that a flexible and customer-focused approach is something that advisers and their BTL clients are increasingly looking for. So if you’ve got a client who’s just missed out on their required loan amount or you want to talk to a provider who takes a common sense approach to lending then talk to the team at The Cambridge.
With a strong demand for rental properties in the East of England and landlords starting to feel more upbeat for their letting business, even within the challenging climate confidence remains positive in the region.