Cash or pension pot/income for maximising LTV
Discussion
Apologies for the clumsy title. I'm interested (post retirement) in a Retirement Interest Only (RIO) mortgage for a new purchase.
In view of this and other plans I'm deciding now where to allocate funds while I've still got 1-2 years of full time work as a higher rate rax tax payer (not as flash as it sounds as I'm in Scotland!)
When calculating affordability and trying to get the largest RIO (to give better house choice), is it better to have taken the tax free pension lump sum, so have more deposit cash? Or is the money best kept inside the pension vehicle and used to calculate repayment affordability?
I have both a SIPP and a DB Pension. The SIPP is probably easy, 25% is better as cash for deposit. However the DB pays out a lump sum of approx 4 times the annual pension, in exchange for the annual pension reducing by approx a third.
My gut feel is that a lender would want as higher LTV as possible, so best to get the lump sums out of both first.
Any received wisdom gratefully accepted....
In view of this and other plans I'm deciding now where to allocate funds while I've still got 1-2 years of full time work as a higher rate rax tax payer (not as flash as it sounds as I'm in Scotland!)
When calculating affordability and trying to get the largest RIO (to give better house choice), is it better to have taken the tax free pension lump sum, so have more deposit cash? Or is the money best kept inside the pension vehicle and used to calculate repayment affordability?
I have both a SIPP and a DB Pension. The SIPP is probably easy, 25% is better as cash for deposit. However the DB pays out a lump sum of approx 4 times the annual pension, in exchange for the annual pension reducing by approx a third.
My gut feel is that a lender would want as higher LTV as possible, so best to get the lump sums out of both first.
Any received wisdom gratefully accepted....
Doesn’t answer your question as such but maybe just be aware of what Rachel may do with the TFC amount in the budget ie materially reduce it.
As last year it’s on the list of maybe’s and of course may not happen.
Fwiw I did take 100% of mine last year to give as early inheritance for my children's house purchase funds as didn’t want to risk not being able to do this.
As last year it’s on the list of maybe’s and of course may not happen.
Fwiw I did take 100% of mine last year to give as early inheritance for my children's house purchase funds as didn’t want to risk not being able to do this.
Can you take out the tax free amount from your DB pension without drawing down on the whole pension?
I know with my DB pension, I couldn’t just take the 25% without taking the income. So it made no sense to do so as I would have been taxed on the pension income at 40% whilst working!
A lower LTV will always be better for a lender although for lifetime mortgages, I think the calculations are different to a normal mortgage.
I know with my DB pension, I couldn’t just take the 25% without taking the income. So it made no sense to do so as I would have been taxed on the pension income at 40% whilst working!
A lower LTV will always be better for a lender although for lifetime mortgages, I think the calculations are different to a normal mortgage.
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