14:12 PM, 16th September 2021, About 2 years ago
If a landlord wants to raise maximum finance on a property with a very low rental yield, the mortgage amount might well be restricted based on rental income. However, with “Top-Slicing” this needn’t be the case.
Why would a landlord want to own a low yielding rental property in the first place?
Well, one example is that they might be more interested in the capital growth potential than rental yield.
Another example might be where a landlords property has appreciated considerably in value but rent hasn’t kept pace. The landlord may want to retain the property rather than paying CGT on selling it and may also anticipate further capital appreciation. However, that does not mean the landlord shouldn’t raise more finance against it to buy more properties.
Using “Top-Slicing” might make all the difference in terms of facilitating raisng the required funds to make further acquisitions as opposed to selling the property and potentially having to pay Capital Gains Tax. Several Landlords also use this strategy to raise funds to make Directors Loans to provide seed capital for a new ‘Smart’ property company structure, which can be used for legacy, inheritance and other tax planning purposes.
Some lenders will accept surplus income, including earned income, self-employed income, pension income and rental income from other properties in order to satisfy the affordability criteria.
“Top Slicing” is available for landlords holding properties in their sole names and in limited companies.
“Tip-Slicing” can provide landlords with greater choice s when it comes to maximising their investment opportunities.
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