Mortgages.scot

I have had a question regarding using a pension as a way to demonstrate affordability for a mortgage, is this something you can do?

Hi, just wondering if you can answer this. Interested in buying a small flat, I am retired (58) and my only income is my pension. Some have said lenders won’t be interested if this is how I will pay others have said it’s fine what’s your view?

Pension Affordability

The bottom line, it should be fine. Ultimately a standard type of Pension is a source of income that you will receive until death and usually increases every year, so really a no-brainer. I have yet to come across any lender that would not consider this.

Providing you are already receiving it and can provide evidence of up to the last few months payments, probably a letter from your pension provider to confirm what you are being paid then those should be all most lenders require.

The only limitation is likely to be the maximum term available. Many lenders are comfortable with a term that takes you up to 75, so in your case, that would provide a maximum term of 17 years.

Lenders will have different views depending on the type of pension. From your email, it appears you have an occupational pension so nothing unusual there which is good. Some types of pensions can appear riskier than others which may deter lenders but that is not the position here I won’t go through that.

You can have a look at my affordability assessment guide for additional information.

Good luck and let me know how you get on.