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Paying for home improvements - small mortgage or pension drawdown?

(8 Posts)
oldfatandtired1 Sun 08-Nov-15 13:38:46

I am recently divorced and my consent order gave me 90% equity in FMH and a generous pension share which gives me and my ex equality of income in retirement. I have bought (fingers crossed!) a lovely new house, mortgage free. The house is small and would really benefit from a small conservatory at the back to be used as dining/extra sitting space.

I need to fund this. Would I be better taking out a small mortgage (c 20k) or taking 20k out of the pension? (I am 55 next week so can take 25% out per annum, tax free). My pension pot is c 250k so still plenty left. I work, and hope to continue doing so until state retirement age. Kids grown up and working away so no dependants now.

whooshbangprettycolours Sun 08-Nov-15 15:42:36

Money is cheap, I'd borrow if the repayments are affordable. £250k won't last long if you keep taking lumps out. It will not generate a huge income either

oldfatandtired1 Sun 08-Nov-15 23:20:09

I've no intention of taking lumps out, it's purely to fund the conservatory. 250k is a pretty good pension pot though, my IFA tells me the average pot in the UK is 30k.

whooshbangprettycolours Mon 09-Nov-15 11:10:52

the average pot being 30k doesn't affect you though, your pot is what impacts you. £250k will kick of about 10k per annum without being eroded. I find my clients are quite surprised at how big a pot one requires for a substantial income.

I stand by the mortgage option being better, if you can borrow cheap money it's a better way to fund the improvement.

OliviaBenson Mon 09-Nov-15 13:48:36

Could you not get a bank loan? The rates are good at present, less hassle than getting a mortgage and you should get enough to cover a conservatory? I wouldn't draw down a pension as you never know what the future holds.m

senua Tue 10-Nov-15 10:35:19

What are all the add-on costs of a mortgage - solicitor, surveyor, administration fee, etc etc. They will add a big percentage onto what is quite a small loan.

oldfatandtired1 Tue 10-Nov-15 18:38:07

Yes, I did wonder about the add on costs of a mortgage. I don't really want to pay an arrangement fee on what will be a small loan. I'm minded to take it out of the pension and plough back what I would be paying in mortgage instalments? It is worth looking into a bank loan too.

TalkinPeas Tue 10-Nov-15 19:54:49

£250k pension pot is not a lot in terms of comfortable lifestyle : its under £10k a year income

just get a simple secured loan

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