The Truth behind Pension Mortgages

A pension mortgage may seem lucrative at the first sight. However, they seldom are, if the customers who took pension mortgage are to be believed.

Nevertheless, before delving into the ill consequences of the mortgage, let us observe why pension mortgages seem lucrative. The most eye-catching feature of pension mortgages, which lures people, is that the pension mortgage requires to be paid out of the pension amount, which one receives on retirement. This is the feature, which drives people to go for pension mortgages.

While in most of the mortgages, the customer would have to pay the full repayment amount himself; in pension mortgage, he gets assistance from the government, though not directly. To every 78p, which a person contributes to the pension fund, the government contributes 22p (This is for a basic rate taxpayer. In case of those who are high rate taxpayers, the ratio changes to 60:40. This means that for every 60p contributed by the customer, governments share is 40p). Therefore, a customer is actually paying just 78 and 60 percent respectively. Besides, the customer is also getting tax relief for paying into the pension plan.

People normally do not like to burden their present life. Their optimism assures them that their future will be secure. Pension mortgage is basically an interest only mortgage. This means that they will have to pay significantly less on the mortgage as they are paying only the interest. People who desire more of immediate relief shall be pleased with the idea of paying less.

However, they have to pay the mortgage amount drawn. At the end of the term of repayment of the pension mortgage, the principal amount will remain unaffected. This is because all through the period of repayment the customer has been paying just the interest. This principal amount will have to be repaid with the help of pension. Normally 25% of the pension amount is available in cash. This may be used to pay the pension mortgage.

Taking these into account, pension mortgages seem to be the perfect mortgage. Neither is the customer forced into paying more on the monthly installment, nor does he face any difficulty in the final repayment.

But, what of the life after the pension mortgage is paid. Is the life ahead as smooth as the repayment? No, it is not. You have retired and have lost a source of income. You are not in the prime of age to device new sources of income. You need something to rely upon once you retire. Utilizing cash from pension fund for paying a pension mortgage will be inappropriate. This reduces the amount of pension available for the customer to use.

Another feature, which can be seen as exploitative, is that one cannot go for full and final repayment until the age of 50. This is because a person is not authorized to use any part of the pension fund before they reach the age of 50. Therefore, one will be able to repay the pension mortgage before maturity only out of other resources.

Yet another feature of pension mortgage, which will give you goose bumps, is that there is no guarantee of the pension fund being able to pay the pension mortgage. A pension fund is an investment linked to the stock market. The amount available on the pension fund will depend on the whims of the stock market. Thus, there can be a scenario where the lump sum received through pension is not able to pay the pension mortgage in full. The borrower in such cases may be called upon to meet the deficit through other resources.

A similar scenario may occur when the borrower is not able to pay into the pension fund because of unemployment or death. The house will be repossessed to pay off the pension mortgage. Taking a life assurance policy can be a counteractive measure. This will help pay off the pension mortgage at the time of repayment.

There are numerous lenders in the UK offering pension mortgages. Many of the lenders are available online. After having screened the lenders and making a list of few lenders, it will be good to contact the lenders personally.

Before taking a pension mortgage one must be extra vigilant. A pension mortgage can endanger your after retirement life. Unbiased and professional advice on the viability of pension mortgage for your individual case will be beneficial.

Aditya Thakur works for UK secured loans web site . To find a UK secured loan that best suits your needs visit http://www.ukfinanceworld.co.uk

---

What is a Self-Employed Mortgage?

Self-employed mortgages, as the term implies are mortgages designed for... Read More

Mortgage Loan Information - Know The Basics When You Refinance or Purchase a Home

If you are currently looking for a new home, chances... Read More

Secured Loans For Home Improvement ? When You Can?t Buy A Luxury Home

A house is just perfect with chipped walls and broken... Read More

Debt Counseling ? Healing Touch for the Ailing Finances

The financial stories remain similar over the months and the... Read More

Types Of Home Equity Loans

There are two broad types of home equity loans:Term loans:... Read More

Mortgage-Refinance Treachery: Avoid Mortgage Bankers and Brokers Biggest Trick -- The Sales Pitch

What the average homeowner or home buyer fails to realize... Read More

2nd Mortgage Loan After Bankruptcy - Get Approved Online

A 2nd mortgage loan after a bankruptcy is possible in... Read More

Securing a US Commercial Mortgage

What's the most efficient way to secure a US Commercial... Read More

Jumbo Mortgage Loans - Getting Approved for a Jumbo Mortgage Loan Online

Getting approved for a jumbo mortgage loan online is similar... Read More

Mortgage Questions to Ask Your Lender

Buying and financing a home today can be overwhelming. Here... Read More

Home Loans and Mortgages ? Time to Consolidate Loans?

Home equity loans and lines of credit are useful tools... Read More

Finding the Online Homeowner Loans You Want

Online homeowner loans have been growing in popularity in recent... Read More

No Money Down Home Loan

Are you in the market to purchase a home but... Read More

Home Equity Loans Categories

Fixed Rate Mortgages: These loans have a fixed rate of... Read More

Interest-only Mortgages Have Their Pitfalls

Rising home prices, particularly on the East and West coasts... Read More

Stop Foreclosure - 7 Tips to Save Your Home

Faced with the threat of a foreclosure on their home,... Read More

Home Equity Lines of Credit - the Basics

A Home equity line of credit is a loan which... Read More

Refinance Mortgage Rate and Mortgage Rates

Refinance mortgage rate is the best rate available to qualified... Read More

What is a Repayment Mortgage?

A repayment mortgage is the type of mortgage that most... Read More

Home Loan Confusion Continues

Unfortunately, most Americans still do not understand how home loans... Read More

Home Equity Loans ? There?s Gold In That There House

To paraphrase an old familiar quote that goes "there's gold... Read More

Fixed Rate Mortgage Loans - Understand the Pros and Cons of the Fixed Rate Mortgage

There are many benefits and drawbacks to consider when deciding... Read More

Homeowners? insurance: The mortgage connection

A home owners' insurance is the cover for the house... Read More

How to Secure the Best Mortgage Deal and Save Yourself Thousands in Interest

When you consider that the average home owner will pay... Read More

Poor Credit Mortgage Reigns High Among Mortgages Available to Bad Credit Borrowers

Like a big brother keeping notes of the erring behaviour... Read More