Top slicing allows a landlord to use surplus personal income to “bridge the gap” when rental income falls short of the interest coverage ratio (ICR).
HSBC said that by adding top slicing, it was allowing “landlords to more confidently pursue property investment opportunities or remortgage”.
As an example, a landlord looking to borrow £225,000 at 75% loan to value (LTV) to buy a BTL property with a rental income of £1,200 per month could borrow up to £186,000.
However, with top slicing, the landlord borrower could borrow the full amount – a boost in borrowing power of 20%.
According to Criteria Brain, of the 85 lenders listed under top slicing, only 40 say they can accept top slicing.
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The lender recently increased its loan-to-income (LTI) multiples, which it said at the time would facilitate borrowing increases of tens of thousands of pounds towards home purchases or remortgages for first-time buyers.
Oli O’Donoghue, head of mortgages at HSBC UK, said: “We are committed to supporting our customers by providing solutions for both the residential and BTL mortgage markets. The introduction of top slicing into our BTL mortgage range is a key example, designed to make BTL mortgages more accessible, while ensuring affordability remains at our core.
“Many landlords, particularly in London and the South East, have strong earnings but are limited by yield-driven constraints. By increasing the amount that can be borrowed through top slicing, we’re enabling more landlords to achieve their property investment ambitions due to providing greater borrowing capacity.”
