HSBC has announced a major policy change that’s set to help landlords across the country the introduction of top slicing for buy-to-let (BTL) mortgage applications. This new approach gives investors the ability to use personal income alongside rental income when assessing affordability. Something that could significantly increase borrowing potential, especially in lower-yield areas or when looking to remortgage or expand a property portfolio. Here is the latest information about the new HSBC top slicing mortgage criteria.
What Is Top Slicing in Buy-to-Let Mortgages?
Traditionally, buy-to-let mortgage affordability has been based purely on rental income from the property. Lenders use what’s known as an Interest Coverage Ratio (ICR) to determine how much you can borrow, ensuring rent comfortably covers the mortgage payments, usually by 125% to 145%. However, this system can sometimes restrict borrowing for landlords whose properties are in areas where rental yields are modest but property values are higher. That’s where top slicing comes in.
Top slicing allows landlords to supplement a shortfall in rental income with personal income, such as salary or business earnings, to meet affordability requirements. In short, it can ‘top up’ your affordability and allow you to borrow more. With HSBC’s new policy, if a property’s rental income doesn’t quite meet affordability tests on its own, the bank will now consider surplus personal income to bridge the gap.
Why This Matters for UK Landlords
For property investors, particularly in London and the South East, where rents often lag behind high property prices, this is a significant improvement. Top slicing can make the difference between being able to purchase a new investment, release equity, or remortgage successfully, even when rental income alone falls short of traditional affordability models.
It’s also good news for landlords who want to:
- Invest in higher-value properties with lower yields
- Remortgage to fund renovations or improvements
- Diversify their portfolio with different property types
- Expand long-term investments despite market affordability limits
Things to Consider Before Using Top Slicing
While top slicing opens up opportunities, it’s not suitable for every borrower. Because the lender uses personal income to support borrowing, it’s important to ensure that your main income is stable and can comfortably support both your personal expenses and any mortgage top-up. It is also equally important to make sure that you’re aware of potential tax implications on rental income and additional property ownership. You should always take professional advice before committing to additional borrowing from both a qualified mortgage adviser and a qualified tax adviser.
Expert Comment from Oportfolio Mortgages
Louis Mason, Head of Marketing and Communications at Oportfolio Mortgages, commented on HSBC’s announcement:
“This is a really welcome move from HSBC. Top slicing has long been a useful tool for landlords whose rental income doesn’t tell the full story of their financial position. By taking personal income into account, HSBC is opening the door to responsible borrowing for landlords who might otherwise have been limited. It’s especially encouraging to see major lenders making buy-to-let criteria more flexible at a time when affordability remains a challenge for many investors.”
Contact Oportfolio Mortgages today to find out how we can help you maximise your property investment opportunities.
Buy-to-Let Top Slicing FAQ
Q: What is top slicing on a buy-to-let mortgage?
A: Top slicing allows a lender to use your personal income in addition to rental income to meet affordability requirements, helping you borrow more.
Q: Who can use top slicing?
A: Typically, landlords with strong personal income who are purchasing or remortgaging buy-to-let properties. HSBC now offers this option to eligible applicants.
Q: Why do lenders use top slicing?
A: It provides more flexibility for landlords with lower-yield properties, ensuring borrowers with strong income aren’t unfairly restricted by rental calculations alone.
Q: Can top slicing help with remortgaging?
A: Yes, it can help landlords refinance when rental income alone doesn’t meet affordability criteria, especially in high-value areas.
Q: Are there risks to using top slicing?
A: Yes, your borrowing depends partly on personal income, so you must be confident in your ability to afford the loan even if rental income falls temporarily
