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Top-slicing vital for HNW buy-to-let clients – Investec

by: Peter Izard, business development manager at Investec Private Bank
  • 03/02/2020
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Top-slicing vital for HNW buy-to-let clients – Investec
Average rents across the UK rose by 3.5 per cent to £953 in the 12 months to December 2019, according to the HomeLet Rental Index.


In London, the increase was smaller at 2.1 per cent, but it took the average rent in the capital to £1,630 a month, which is 71 per cent higher than the overall UK average.  

In the capital, however, tenant demand is exceeding supply at a greater rate than elsewhere. Savills forecasts for the next five years expect London rental prices to increase by 18.8 per cent, compared to the rest of the UK excluding London, which is only anticipated to rise by 13.1 per cent over the same period.  

There continues to be strong opportunities for buy-to-let investments in London, but the relatively low yields mean that traditional rental calculations don’t always work, particularly on high value properties.  

It’s in these circumstances that a more individual approach is required, often one that considers the client’s personal income as a way of supplementing the rental income on the property, otherwise known as top-slicing.   


Case study

We recently worked with a partner at a leading international law firm who wanted to move to a new family home in London. Rather than sell their existing property, the client was keen to remortgage it as a buy to let, freeing up equity to use as a deposit for the new home.  

The challenge was that – as with many partners within the legal profession – the majority of the client’s income was paid as an annual distribution, which was supplemented with monthly partner drawings. The partner was seeking an interest-only buy-to-let mortgage with a loan to value (LTV) of 75 per cent on a £2.6m property.   

The size of the loan, combined with no history of rental yields and atypical earnings, meant the client’s needs were difficult for traditional lenders to fulfil. However, we were able to structure a solution that enabled the client to achieve their objective with the ability to top slice.   

While a 75 per cent LTV is above our standard maximum LTV on buy to let, the client agreed to make two mandatory repayments from their personal income over the initial two years of the mortgage to bring this down to 70 per cent. These payments would be in addition to standard repayments made from the rental income.   

The client’s existing asset base and the location of the property also ticked all the right boxes and these factors gave us all the evidence needed to make a positive lending decision.  

This is just one example where finding the right solution for a particular client requires a holistic view of their financial situation and a bespoke approach tailored to their individual circumstances.   

When it comes to working with high net worth individuals, this approach is required on buy-to-let mortgages as well as residential lending, and it can be the difference between success and failure when it comes to lending on high-end investment property. 


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