What is a Pension Fund Mortgage?
- A pension fund mortgage allows you to buy a property through your pension fund. This plan can be an extremely profitable option for Irish pension holders. As all income and gains within pension schemes are exempt from income tax and capital gains tax, both rental income and profits from sale of the property will not be subject to these taxes.
- With a pension fund mortgage you can choose the property yourself and can borrow up to €500,000 subject to a maximum mortgage of 50% of the value of the property.
- Under Revenue rules, a property management company will manage the property on your behalf, this means you can have very little involvement with the property if you so wish.
1. You can choose the property
- As you can choose the property you wish to purchase you can use your own market knowledge and contacts to assess unique opportunities. You can also choose to acquire residential or commercial property.
2. You will pay no income tax
- If you owned the property yourself you may be subject to income tax on rent earned, but with a pension mortgage you will pay no income tax.
3. No capital gains tax
- Likewise, if you owned the property and sold it, you would have to pay capital gains tax on the sale, this is not the case for pension mortgages.
4. Control over all aspects
- You have control over all aspects of your pension affairs including all investment and contribution decisions.
5. Other assets are protected
- When borrowing to purchase a property, the other assets of the pension scheme are protected as the bank’s only recourse is to the assets of the sub-fund and not to the pension itself.
6. Must not be a Connected party
- You cannot have owned the property or be a connected party to the owner of the property prior to purchase under revenue rules. The property cannot be rented to a connected party.