What is top slicing and how did it help our asset rich client buy their dream home?

Are you exploring top slicing as a financing option? We have the banking contacts to provide a tailored solution where other lenders may not be able to help. To discuss this or any other large or complex mortgage case, please contact us on 020 7519 4984 or email us.

The finance world is full of jargon, which can be alienating and intimidating. A huge part of what we do as advisers is helping to find and explain different lending techniques which solve often very complex lending requirements.

Top slicing is a term we use in the mortgage world which usually refers to buy to let income. If you own properties which are let, usually the lender will want to see that the rental income will cover the mortgage. However, sometimes this isn’t the case and the mortgage payments need to be ‘topped up’ – usually by another income stream. Often this is relatively straightforward, as it can be topped up by employment income. However, in some of the cases it’s much more complex.

Case Profile
A recent case from earlier this year was a classic example of top slicing at work. Our client wanted to rent out their existing home and buy a new house, which would become their main residence. Their new property was worth £3.3 million, meaning our clients needed a total mortgage of £1.4 million across two properties.

Our client was asset rich, with a net asset value of over £8 million across property and investments. However, our client was out of work until starting a new role on a high salary which alone wouldn’t cover the mortgage repayments.

Solution
We approached a specialist, private bank with a proposition to top slice the total assets as a method to cover the interest payments on the mortgage. The private bank also offered a full interest only facility across both mortgages. Our client was delighted when the offer was produced within three weeks, meaning they could move into their new home as soon as possible.

This case is another great example of our tailored and bespoke approach to every lending challenge we face. If you think you could benefit from our team’s expertise, don’t hesitate to get in touch.

Deal Highlights

Loan amount 1:
Loan amount 2:
£900,000
£500,000
Rate 1:
Rate 2:
Variable rate of 1.49% + Banks Base Rate 0.75%
2.39% 2 year fixed rate
Loan To Value 1:
Loan To Value 2:
27%
15%
APRC 1/2: Overall cost for comparison 3.70% APRC representative variable
Term 1/2:13 years
Type: Interest only
Loan purpose: Residential purchase
Lenders arrangement fee:0.5% of loan amount
Early repayment charges:2% of outstanding loan amount in Year 1, decreasing to 1% in Year 2

Notes
This case study is for information and illustration purposes only. It is not an offer, or suggestion of an offer. Each mortgage case is assessed on an individual basis and there is no guarantee that the solution described here can be repeated in the future.

Please note that this specific deal may not be available to – or suitable for – all customers, dependent on their individual circumstances. The rate quoted may become out of date at short notice and may not be available at the point at which customers enquire about it. This document may not contain all the information needed for customers to make a decision and they should seek advice.

Overall cost for comparison is 3.70% APRC representative variable based on 26 payments at a lenders variable rate, currently 2.24%, and 26 payments at the fixed rate of 2.39%, followed by 129 payments at the lenders standard variable rate for each loan. 

Because all, or part of, the mortgage is currently, or will revert to, a variable interest rate mortgage, all actual APRC could be different from this APRC and the payments could increase if the interest rate of the loan changes. For example, if the interest rate rose to 9.75%, the payments could increase to £11,500. The actual rate available will depend on your circumstances. Ask for a personalised illustration. 

Your home or property may be repossessed if you do not keep up the repayments on your mortgage. Changes in the exchange rate may increase the sterling equivalent of your debt. Please note the Financial Conduct Authority does not regulate some aspects of bridging finance. 

To make an enquiry call us on 0207 519 4984.

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Your home or property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. Changes in the exchange rate may increase the sterling equivalent of your debt. You may have to pay an early repayment charge to your existing lender if you remortgage. Think carefully before securing any other debts against your home.  

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