Pension income / mortgages
Rebecca_Tuck
Member
Hi all,
Does anyone know how mortgage providers tend to treat pension income when it comes to assessing affordability?
We have a client who is planning to up-size and is looking into getting a mortgage to cover the difference. Their only income currently is a DB pension - so guaranteed - but they're still only 59 so a while away from SPA. The wife has c. £800k in a PP and the has asked about "triggering" this to demonstrate additional annual income.
For the purposes of a mortgage assessment, does it matter if the income is taken via drawdown, or would it need to be guaranteed? We don't deal with mortgages and I've not come across someone trying to take one out using pension income before, so any guidance would be much appreciated!
Thanks 
Becca
Comments
Hi Becca
We've just arranged a mortgage with Principality for a recently divorced lady who had a pension sharing order for her ex-husband's pension, and a smallish pension of her own. She's in her early 50s with a fairly low income so we went for interest only with the term until SPA. The tax free cash from the pensions is the repayment strategy.
Becky
Paraphrased response from my mortgage broker:
Most lenders only want to know about guaranteed income.
He had done a case where the drawdown pension was in payment and the lender he went to wanted to see a history of regular credits into the bank account.
However, in most cases, income that isn't secure isn't going to cut it with established lenders.
From my point of view, how much do they want to raise? If they've £800k in a pension, why not use the £200k PCLS? If she takes income from FAD then she triggers MPAA, so if she's working and continuing to make pension contributions she'll possibly be affected by this.