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Our property investment expert is Jeni Browne, Sales Director at
Mortgages for Business
www.mortgagesforbusiness.co.uk
Tel: 0345 345 6788
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Question
Top slicing – what does it mean, exactly?
I have heard some lenders will offer a service called ‘top slicing’ where they will look at my income as well as my potential yield on a buy-to-let property.
Do I need to find specialist lenders to do this and what will they consider as ‘income’? Will any dividends from investments be taken into account or rent from other properties or is it just salary?
Answer
Top slicing is where the lender factors in your own income, rather than just the rental income to assess affordability on a buy to let mortgage. Not all lenders do this, but there is a mix of specialist and high street lenders who do.
In terms of what is considered income, that varies depending on the lender. Some will take income beyond traditional salary, but it’s probably best to speak to a broker about which lender does what and what would be most suitable for your circumstances.
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Question
Taking on a buy-to-let from a family member
My Mum owns a property which she rents out and on which she has a buy-to-let mortgage. She has recently been diagnosed with dementia and does not want the responsibility of the property any longer. Therefore she has asked if my sister and I can take over the running of the buy-to-let from her. We are keen to take over as a way of earning some income. We have considered selling it but it’s got a high yield and we think it will be worth more in the future so would rather sell later on.
The problem is neither my sister nor I have ever had a mortgage before. What’s more, I have not got a great credit history. Will this impact our chances of getting the mortgage on the property? Or is there some way we could join with my Mum and become three-way mortgagees? Hope that makes sense. Thanks for your help.
Answer
I’m so sorry about your Mum, but what a remarkable woman to plan for the future this way!
The easiest thing to do first is to add you and your sister to the mortgage and property title deeds and then remove your Mum from them in a couple of years.
The reason for this is that it’s more difficult (but not impossible) to get a buy-to-let mortgage as a first-time buyer.
If you don’t want to do this, then there will still be options for you, but lenders will likely determine the mortgage affordability on your incomes rather than the rent, which won’t necessarily get you the best deal.
In terms of your credit history, it depends on what is showing on your credit file. I would collect up your credit report and recent payslips and speak to a broker to review your options in more detail.
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Question
Can buy-to-let help with funding?
I know it’s tricky to get a mortgage if you are self-employed and I wondered if this applied to the buy-to-let sector too? I am a graphic designer and have inherited some cash which I would like to put down on a buy-to-let property. It’s £40,000 so I think I could get something quite decent.
However, my earnings are a little up and down – feast or famine, I call it! Will this impact my application and is there anything I can do to improve my chances of being accepted?
Answer
When you’re self-employed, lenders look at your income on an annual basis, based on your tax returns. This means that they don’t consider the monthly variations (which is quite normal for the self-employed).
Additionally, there are a good number of buy to let lenders that don’t have a minimum income requirement, so as long you’re earning something, they’ll consider your application. Being self-employed certainly doesn’t preclude you from the buy to let investment world! In fact, the majority of my own clients are self-employed, so you’re in good company. Good luck!
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Question
How many mortgages do I need?
I have purchased a terraced house which I intend to separate into two flats to rent out to tenants. I need to do some work on the house to achieve this and will therefore be taking out a buy-to-let mortgage. How does this work with the mortgage calculations?
Obviously it’s one property but when I eventually let it out I will have two separate tenants paying the rent. Any advice you can offer would be really helpful.
Answer
The most appropriate way to finance a purchase like this is by using a bridging loan. Once works are complete, you can refinance onto a buy-to-let mortgage designed for multi-unit blocks (more than one self-contained unit on the title).
The reason for this is that if you take a traditional mortgage upfront, you’ll need to obtain the lender’s consent to change the property into two units which they may or may not accept. By using a bridging lender initially, as long as they know what your plans are from the beginning, they won’t mind. I hope this helps!
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