How building societies treat pension mortgages

Required Reading


How building societies treat pension mortgages

If you were not linking your pension to a mortgage, you could save for your retirement by a series of single premiums, which could be adjusted each year in the light of your income earned. This is obviously more flexible, and it has another (hidden) advantage that the rate of commission payable to intermediaries -brokers or financial advisers -is low compared to the regular premium plans, where in the first year of a plan it can be as high as 60%.

6 What if you fall ill?

If you are a self-employed person and your income falls because you can't work, you'll have enough problems as it is. And even if you have covered this risk by taking out a permanent health insurance policy (to pay an income should you be ill for any extended period of time) you'll be liable to face the same problems that we considered under question 4. Payments under a PHI policy do not normally count as `earned income' and so you won't be able to qualify for tax relief on your pension plan.

An absolute necessity, if you are going to use a pension plan for your mortgage, is to choose one that incorporates a 'waiver of premium' benefit: that is, an insurance policy that will continue paying your pension premiums if you are ill.

More on 2nd mortgages

Why should you pay extra commission to the life companies?

Of course, this would make life difficult for you whatever sort of mortgage you've got; but there are a couple of extra points to be borne in mind with a pension mortgage which could make it especially nasty.

Firstly, unlike mortgage interest and life assurance premiums, which you pay net of the applicable rate of tax relief, pension premiums are paid gross; you receive the benefit in the shape of less tax to pay at the end of your financial year. For many self-employed people, this could mean a delay of up to 14 to 20 months. Simply in terms of cash flow, then, this could be a problem.

Secondly, you have to remember that there are limits to the amounts that you can put into pension . . .... see: Why should you pay extra commission to the life companies?

Current Mortgage Offers

  • At Commercialise Yourself you can compare mortgages using our repayment calculator, look for special offers for first time buyers or for 95% loan to value mortgages and see the most popular choices, Nationwide, Accord etc, we now even have a buy to let section for the brave or heart or strong of pocket! You can send us an email if you want to know more about mortgages and what we do and we will get back to you as soon as we are able.


    Finding the right mortgage can be stressful, but we’re here to help you every step of the way.

    Even if you have no proof of income, poor credit rating or facing repossession of your home, we can normally say YES (even if the high street lenders have said NO)!

    Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage. The overall cost for comparison is 7.9% APR. The actual rate available will depend upon your circumstances. Ask for a personalised illustration. There will be a fee for mortgage advice. The precise amount will depend upon your circumstances but our average fee is 2.36% of the loan value. We are authorised and regulated by the Financial Services Authority for regulated mortgage and non-investment insurance contracts.