Pension Lending

Pension Led Funding for older couple.

We can help you source funding to buy a commercial property (or properties!) with a self-invested personal pensions (SIPP) or a small self-administered scheme (SSAS).

Key Principles

  • You can borrow up to 70% of the cost of the property as a “commercial mortgage”.
  • Pensions can normally borrow up to 50% of the net value of the fund.

So say your target property costs £600k, you could in theory borrow up to £420k (70%) but you’d need the value of your pension fund to be worth £840k.

How is the loan serviced ?

Payments to the lender are normally capital and interest, repaying over 15-20 years.

Banks are looking for up to 1.75x debt service cover from rent, so you would have to set up a lease between your company and the pension with a market facing rent that also lined up to the 1.75x debt service cost. At the same time banks want the rent to be market facing, not higher than the market rent (over-rented) and not lower than market rent (under-rented).

What other factors are important ?

  • A first legal charge will be taken over the property.
  • You’ll need to take advice from whoever advises you on your pension and you’ll need to involve you pension trustees for their permission.
  • As with all property transactions expect arrangement fees (1-1.5%), valuation costs and legal fees. Sometimes prepayment fees will apply, this varies by product and lender.

Ready to progress? Get in touch here.

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