move pension to a pension mortgage

G

giblet

Registered User
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Hi

I am about to start my personal pension and I am a sole trader, is it possible in a few years to change my pension to a pension mortgage in order to buy an investment property, i'll investigate the finer details but just wondering if it is possible ?

THanks
 
Yes. Just make sure that you get a good deal on the charges on the initial contract as you may have to increase the contributions to fund for the mortgage repayment at the end of the term. If the charge is a % of contribution it can get very expensive.

Don't listen to the lender if tey say you have to do a 'new' policy.
 
A Pension Mortgage comprises two separate elements:
  • The borrowing ( on an interest only basis)
  • The pension plan (the repayment vehicle)
If you already have a pension plan in place when you go looking for the interest only loan, it should only be a question as to whether the contribution level to the pension plan is sufficient to reapy the borrowing on retirement. You may need to re-assess the level of contribution. You do not need to effect a new pension plan, since the pension plan cannot be assigned as security for the loan. The Bank only has security over the property.
The fact that you have built up some funds already in the pension plan should help the process.
 
Are pensions mortgages different to buying a property as part of a self directed pension. I got the impression that it was possible to actually pay off the mortgage with the pension contributions in the latter case.
Is it correct to say that all the pension\property options exclude PPR or other personal dwelling?
 
  • Yes very different - with one the pension fund is being used as a means to repay the capital on the mortgage when the pension matures...in other words the property sits "outside" pension fund...as you mentioned with a self-admin scheme the contributions repay the capital on the property which has advantage that loan may be paid off sooner AND more importantly that there would be no CGT on any capital gain on property (cos it is in a pension fund)
  • Yes the property must be at "arms-length" from the pension scheme beneficiary/sponsor
 
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