What does Pension Mortgage mean?

The pension mortgage option is a good solution because first of all the funds are tax deferred. It is your choice if you are self employed for example, because then you definitely need some sort of pension plan for yourself. So, you can connect your mortgage plan with your pension plan, which means that by making the necessary contributions towards your pension plan, at the end of the mortgage term you will be able to pay off your mortgage with one single lump sum. Certainly in the meantime you will make the required payments towards you lender, because a pension mortgage most commonly supposes taking out an interest only loan.

The repayments made towards your lender are constituted by the interest only part of your mortgage.  But perhaps you are now asking yourself what is going to happen with your retirement amount then, because if you pay off your mortgage there will be no enough capital left so as to provide you the necessary monthly source of income. Well, after repaying your mortgage, there usually will be left an amount and you should consider the annuity option.

Opting for a pension mortgage has both advantageous and disadvantageous sides; therefore you should very carefully weigh your options before joining any of the mortgage plans. Perhaps consulting a financial advisor would be a very good idea.