0808 189 0463

      Menu

        0808 189 0463

        Updated: December 15, 2022

        SIPP Mortgages

        If you want to invest in property within your SIPP, one way to do it is through a SIPP mortgage. Find out how they work in this guide.

        Ask a quick question

        We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions. Ask us a question and we'll get the best expert to help.

        FCA Logo
        1 of 2
        2 of 2 Send!

        No impact on your credit score

        Tony Stevens

        Author: Tony Stevens - Finance Expert

        Updated: May 31, 2019

        A self-invested personal pension (SIPP) offers a whole range of ways for economically savvy investors to save for retirement, but did you know that it’s also possible to get a mortgage through your SIPP to buy commercial property?

        In this article we’ll look at how to get a SIPP mortgage, the types of property you can buy and how an independent pensions advisor can help you get the best deal.

        What is a SIPP mortgage?

        Buying commercial property within a SIPP is a popular way to invest, and while it might seem counterintuitive for a savings product to take on debt, it is possible for your SIPP to borrow money to buy property in the form of a mortgage.

        A SIPP mortgage is a loan made directly to the SIPP, not to you or your business. Rental income from the property goes back into the SIPP and is used to make mortgage repayments.

        Getting a SIPP mortgage opens up the possibility of more ambitious investments and can be a great way to grow your pension pot more quickly than you otherwise might have been able to.

        What type of property can you buy?

        The most common type of property bought through a SIPP is commercial property. It is possible in some circumstances to invest in residential property with a SIPP, but it has to be done indirectly via a property fund. You certainly can’t use a SIPP to buy a residential property for you to live in as your main residence.

        All sorts of different commercial properties are eligible however, including office buildings, restaurants, pubs, farms, care homes and many more. Some people choose to buy their own business premises through their SIPP and then lease it back, giving their business an extra layer of security. Other people purchase unrelated commercial property as an investment, purely for the rental income and capital growth.

        Speak to a expert today

        How much can you borrow?

        There is a cap on SIPP borrowing of up to 50% of the net value of your pension fund. For example, if the current value of your fund was £250,000, you could borrow up to £125,000, giving you a total of £375,000 to invest.

        If you have any existing borrowing against your SIPP, this is deducted from the fund value before the 50% limit is applied. In this example, if you already had an outstanding loan of £70,000, the net fund value would be £180,000 and you would be able to borrow £90,000.

        How to get a SIPP mortgage

        If you’re keen to borrow money through your SIPP to purchase property then there are a few steps you should take before you make your application to put you in the best possible position.

        Review your options

        As a first step, it’s important to make sure that a SIPP mortgage is the right choice for you. Although there are tax incentives, amongst other benefits, there are other factors to consider, such as the balance of assets in your portfolio and the flexibility it gives you for further business lending.

        We’ve summarised some of the key factors to consider further on in this article, but we would recommend that you take professional advice if you’re not sure as there may be a more suitable way to fund the purchase.

        Speak to a specialist SIPPs advisor

        Getting a SIPP mortgage is a complex financial transaction, with implications for tax, your personal and if applicable, your business finances. There are also detailed rules around buying property within a pension, so it’s not something to be entered into lightly.

        Interest rates for SIPP mortgages tend to be higher than a standard buy-to-let or commercial mortgage, but using a pensions advisor who has specific experience in SIPP mortgages will allow you to access the best rates and terms. They can also guide you through the SIPP rules and regulations and make sure you’re making the most of the tax benefits.

        Get your lease in place

        Both your lender and your SIPP provider will want to be sure that your property purchase makes good financial sense and that you’re able to maintain the regular repayments. To support this, your lender will want evidence that you have a lease in place, whether this is with a third party that you are renting the premises to, or your own business.

        Whether you’re buying as an owner-occupier or renting to another business, lenders will want to assess the finances of the company taking on the lease to make sure it’s in a position to keep up with the rent, which in turn will fund the mortgage repayments.

        Benefits of a SIPP mortgage

        Although the process of getting a SIPP mortgage can be complex, there are plenty of payoffs, primarily the tax benefits. Firstly, pensions are not subject to capital gains tax, so if and when you decide to sell the property, 100% of any gains you’ve made go back into your SIPP. It is also important to note that the rental payments received by the SIPP will be income tax free.

        When it comes to the rents you receive, you’ll be benefitting here too on a regular basis as there will be no income tax to pay and all the income you receive can go towards mortgage repayments. Depending on how your SIPP is set up, you may also be exempt from inheritance tax should your SIPP still own the property when you die. One of our independent pensions advisors can check this with you as part of their free pension review service.

        Other benefits of a SIPP mortgage include:

        • Being able to make bigger purchases and gain from bigger price increases over time.
        • If you buy and lease back your own business premises then you’re seeing the benefit in your own pension rather than handing over money to a landlord.
        • Extra security for you and your business in owning the property, plus in the event of bankruptcy if your SIPP owns the premises separately these cannot be taken by creditors.

        Things to consider

        Although buying a commercial property with a SIPP mortgage may seem appealing in a lot of ways, there are factors to keep in mind when deciding if it’s the right course of action for you.

        • Will it lead to having all of your eggs in one basket? For many people, a commercial property purchase makes up a large chunk of the assets in a SIPP and this lack of diversification can be a potential risk factor.
        • Do you feel confident about the rental payments? Whether you’re leasing to your own business or a third party, making your mortgage repayments does depend on the business maintaining profitability, something which is by no means a given in uncertain economic climates.
        • Do you have the knowledge to get the best rates? If you’re not sure about which specialist lenders will be right for you, speak to one of our independent pensions advisors for help.
        • Might you be better off buying the premises as a business? Many commercial lenders offer more generous LTVs than the 50% cap on SIPP borrowing, plus property owned by a SIPP cannot be used in the future as security for any other business borrowing.

        Who are the best SIPP mortgage lenders?

        Getting a SIPP mortgage isn’t as simple as getting a residential mortgage or even a standard commercial mortgage and while there are some high street banks, Barclays for example, and a few select building societies who will be prepared to consider it, you’ll likely be best going via a specialist lender.

        These sorts of lenders can be harder to find, and their terms and rates are likely to vary significantly. Your pensions advisor will be able to match your circumstances with the right lender for you and save you a lot of the leg work of research and comparison.

        Selling a SIPP property

        If you decide you want to sell a property held in your SIPP then the process is much the same as selling any other SIPP asset and you can choose to sell your whole interest or just part of your stake.

        Remember too that a benefit of owning property through a SIPP is that pensions aren’t liable to pay capital gains tax and therefore any money you’ve made on the property will be reinvested back into your SIPP in full.

        Speak to a pension advisor who specialises in SIPP mortgages

        If you’re clear on the pros and cons of SIPP mortgages and are thinking it could be an option for you then the next step is to talk to a pensions advisor who specialises in SIPPs and mortgages for them. They will be able to use their knowledge and contacts to find you the best rates and terms for your circumstances, and potentially save you both time and money.

        All of the advisors we work with are independent and our matching service is free of charge, so give us a call now on 0808 189 0463 or make an online enquiry and we’ll arrange a call with the advisor that we think has the right experience and expert knowledge to help you.

        Speak to a expert today

        FAQs

        Yes, depending on your SIPP provider you can buy land either for development or simply to hold as an asset. You may be able to get a SIPP mortgage to help fund the purchase, subject to eligibility, a valuation and your provider being happy that it’s a financially viable investment.

        Ask a quick question

        We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions. Ask us a question and we'll get the best expert to help.

        FCA Logo
        1 of 2
        2 of 2 Send!
        Tony Stevens

        Tony Stevens

        Finance Expert

        About the author

        Tony has worked in a vastly diverse array of areas in the pensions industry for over 20 years. Tony regularly writes for trade press, usually on topical and pensions pieces as well as acting as a judge at prestigious national events.

        Tony is also a highly qualified Independent Financial Adviser in his own right. His mantra has always been “Hope for the best, but plan for the worst”, and believes that the biggest impact that an adviser can have on a client’s life journey is to take them on a journey from generally having little or no real idea of what their retirement will look like, to giving them the understanding of what their retirement looks like now, then helping them navigate a path to what they want their retirement to be.

        FCA Disclaimer

        *Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

        Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.