P
Peter W
Guest
I am 30 years old, a first time buyer and looking to borrow 500-600k for a residential property (as my primary residence) with 8-10% of my own equity. The nature of my work is that I receive an annual bonus which is anywhere between 75 - 125% of my annual salary. Unfortunately, I'm taxed at 42% on the majority of my basic salary and my bonus.
I've spoken to a number of banks and they have indicated that they would be willing to grant me a quasi-pension mortgage: I would pay interest only over the life of the mortgage (though this may be reviewed after 3-5 years) and, at the same time, would set up an independent Additional Voluntary Contribution scheme (at the moment I can invest 15% of my gross annual income into this). Contributions to this scheme would be made out of my annual bonus such that the capital repayment on the mortgage would be covered upon maturity of the pension. This would allow me maximum tax relief on both mortgage interest and my annual bonus.
What I intend to do is reinvest the capital repayments I would have otherwise been making on an annuity
mortgage into a diversified portfolio of assets.
My questions to you are:
1. What do you think of this idea? Do you think it's advisable?
2. Is there a more tax efficient method of buying a house than this?
3. How will it affect my credit rating/future borrowing capability.
4. Should I opt for fixed, variable or tracker?
5. Who, in your opinion, would be the best provider in this case?
6. By reinvesting the capital repayments am I naturally hedging myself against negative equity? (assuming I use the returns to pay down the capital on the mortgage).
7. Aside from negative equity, an exponential rise in interest rates, a tarnished credit rating or the fund not growing enough to cover the final capital repayment, what are the risks I've overlooked?
Thanks