This is a type of Commercial Investment Mortgage where the borrowing entity is a Pension Fund.
Pensions can be a SIPP (self-invested personal pension) or a SASS (small self-administered scheme).
Much of the information contained with Commercial Property Investment remains valid when it comes to Pension Lending but there are also so regulatory additions to consider:
Pensions cannot own Residential Properties or Semi-Commercial Properties
The loan amount cannot exceed 50% of the value of the total Pension fund
Property loan to value cannot exceed 70%
In most cases, the Investment Property is usually linked to the key person. Perhaps it is the premises where their business trades from, rather than a complete 3rd party transaction.
As part of arranging a Pension loan, clients usually include their own Financial Adviser and a Pension Trustee Company who we would work with to ensure the structure is correct.
Only a few banks are able to support this type of transaction.
Due to the Pension restrictions, loan to value is typically very low (under 50%), which means pricing can be low as a result, although this does vary.
Interest rates are available in the range of 2.5-5.5% per annum. Arrangement fees are in the range of 1.5-2% of the loan amount which can be added to the facility.
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