Pension backed interest only mortgage

Bemma

I'm in the early stages of considering a new mortgage.  As in the title, I'm doing some calcs on a pension backed interest only mortgage.  This is probably quite a niche option, so I will be consulting local mortgage broker if I decide to progress along this path.

I have done some initial research, and will be looking for some help with the following questions:

1. It seems only 15% of a pension fund projection can be used a payment vehicle.  Is this standard, or do some providers offer more?
2. My pension projection "takes into account an estimate of the effect of inflation" - with inflation estimate of 2.5%.  Therefore over 20 years a projection of £600k, will have an absolute value of £1million.  The mortgage amount does not change with inflation, so the 15% value in point 1, does it use the absolute value (£1mill) or the inflation effected value (£600k)?
3. Who are the main providers - looks like Halifax, Nationwide are in this market?
4. Also, LTV seems to be restrictive, 60% mostly.  Again any providers that may offer more?

FWIW: Household income is £110k. Mortgage value maybe £250k. LTV variable: 50-75% possibly.  I'm considering this option as I benefit from a generous Salary sacrifice pension scheme, HRT tax, employee and employer NI savings.  I'm doing the sums to see if this works for me…

amnblog

Do yourself a favour and take a capital repayment mortgage.

dunstonh

This is probably quite a niche option

Beyond niche.  Almost non-existent for 25 years.

K_S

Bemma said:

I'm in the early stages of considering a new mortgage.  As in the title, I'm doing some calcs on a pension backed interest only mortgage.  This is probably quite a niche option, so I will be consulting local mortgage broker if I decide to progress along this path.

I have done some initial research, and will be looking for some help with the following questions:

1. It seems only 15% of a pension fund projection can be used a payment vehicle.  Is this standard, or do some providers offer more?
2. My pension projection "takes into account an estimate of the effect of inflation" - with inflation estimate of 2.5%.  Therefore over 20 years a projection of £600k, will have an absolute value of £1million.  The mortgage amount does not change with inflation, so the 15% value in point 1, does it use the absolute value (£1mill) or the inflation effected value (£600k)?
3. Who are the main providers - looks like Halifax, Nationwide are in this market?
4. Also, LTV seems to be restrictive, 60% mostly.  Again any providers that may offer more?

FWIW: Household income is £110k. Mortgage value maybe £250k. LTV variable: 50-75% possibly.  I'm considering this option as I benefit from a generous Salary sacrifice pension scheme, HRT tax, employee and employer NI savings.  I'm doing the sums to see if this works for me…

@bemma Please keep in mind that the following are very very general answers to your questions, they may or may not be applicable to your particular individual cirumstances.

1. Some lenders do consider a higher percentage, typically 25%. There is likely to be a trade-off in rates.

2. Would need to run this past the specific lender, but I would assume it will use the figure in the formal pension projection.

3. I might be wrong, but I don't think Nationwide I/O accepts pensions as a repayment vehicle. I rarely do I/O mortgages based on a pension-pot repayment vehicle, so can't comment on the 'main lenders', it probably varies depending on your particular circumstances. 

4. Yes, there are lenders who will potentially go up to 70-75% on I/O subject to meeting criteria. How much of an overlap that subset of lenders has with point 1 above will need some research to find out.