Pension Mortgage

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Can your pension pay off your mortgage?

One of the latest products on the market is the pension mortgage, which is good for high rate taxpayers but very risky too. Think of it as an interest-only mortgage that relies on your pension plan to pay off the initial money you've borrowed.

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A pension mortgage isn't for the faint-hearted: designed to help self-employed types save cash, it uses the combination of a mortgage and a pension plan to pay for your home. The idea is reasonably simple: you pay the interest and at the end of the term, your pension fund pays off the outstanding balance.

It's a very tax-efficient way to buy property pension fund payments are eligible for tax relief but it's risky. As with an endowment mortgage, a pension mortgage means you're gambling that the stock market is going to recover and earn you some serious money. If it doesn't, you could be in trouble.

Another reason to approach a pension mortgage warily is that because part of your pension is paying off your house purchase, it means you'll have less money when you retire.

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