Pension Mortgages explained - Apply for a Pension Mortgage

Pension Mortgages can be a good investment for offering tax relief and providing life assurance cover. Not everyone will find pension mortgages suitable, and those within the top rate tax band could gain the most from this scheme. In general, pension mortgages are attached to interest only loans, which can be paid off using an employer’s pension scheme or contributions from a personal pension scheme.

Apply for a Pension Mortgage

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Apply for a Pension Mortgage

When an individual retires, they will be eligible to a tax-free lump sum of cash which is used to pay the mortgage debt. Those who are eligible for a pension mortgage should speak regularly with a financial adviser for up-to-date pension related property advice and guidance.

Pension Mortgages – The advantages

• Payments made into a pension plan can qualify for tax relief as soon as they are paid.
• Individuals in the top rate tax band can claim a high level of tax relief on pension contributions.
• Tax relief may also be applied to pension plan term insurance.
• If your pension plan savings exceed your mortgage repayments you could receive a lump sum of cash to spend as you wish.

Pension Mortgages – The disadvantages

If you join a work related pension scheme or if you loose your job you will not qualify for the mortgage pension scheme and will have to find capital from elsewhere to pay off your mortgage loan.

If you cash in your plan early this could result in a penalty fee. Proceeds from payment vehicles such as an ISA fund may not provide enough capital at times. If there is any shortfall the borrower will have to find the outstanding debt from elsewhere.

Property Advice Blog Tip!

When you take out a pension mortgage be sure to check your policy fund regularly to ensure that the plan is meeting its target. If you think there could be a shortfall, invest in another product to cover payments. It’s also wise to talk regularly to a financial adviser for property advice on pension mortgages and investment policies. If you don’t keep abreast of your payment vehicle and there is an investment lapse you may get into financial difficulties.

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