Many wanna be pensioner landlords don’t know where to start, study suggests
More than a quarter of would be landlords in England and Wales considering buy to let to boost their retirement income do not know how to apply for a mortgage to get started, new research shows.
The research conducted for specialist mortgage lender Kensington shows more than half of over 40s retirement savers would consider investing in buy to let to increase their income in retirement following the launch of pension freedoms.
When it comes to choosing the right product, around 44% would use a broker to source a buy to let mortgage while 28% would go to their existing lender, but 28% don’t know how to get started.
Kensington analysis of average flat and maisonette prices across England and Wales shows the 25% deposit need for a first time landlord taking the plunge following pension freedom is nearly £43,000. It ranges from £8,128 in Blaneau Gwent in Wales to more than £104,000 in Greater London.
It suggests that would be landlords considering investing pension cash believe the risk of failing to achieve a comfortable level of income is the biggest risk. Around 47% of those questioned are concerned about the risk of not achieving the income they want followed by 42% who fear investing in buy to let could mean running out of money in retirement.
Around 25% are concerned about the income tax implications of withdrawing pension cash to invest while 21% fear they will not understand the rules on buy to let.
‘The outlook for the buy to let market is bright and the potential for further growth as pension freedoms come into effect is undeniable. However the would be landlords will need to be realistic and it is worrying that so many are considering buy to let without knowing how to apply for a mortgage,’ said Steve Griffiths, head of sales and distribution at Kensington.
Advice from brokers on mortgages is vital. Claims of a wall of money are unlikely to come true and in any case raising a 25% deposit for a buy to let mortgage from pension funds will be tough as a look at average property prices across the country shows,’ he added.
Meanwhile, separate research shows that 12% of 20 to 35 year olds are prepared to ask their parents to access pension savings to help pay for a mortgage deposit. But only half as many over 55s are willing to use their pension to help children or grandchildren buy a home, says the study from investment and pension provider Old Mutual Wealth.
However, just 6% of those in the 55 to 70 age bracket say they would use some or all of their pension wealth to help children with a house deposit.