the 60% tax trap
Since the government introduced auto-enrolment in 2012 attitudes have shifted. There still needs to be more education on the subject, such as the 60% tax trap for earners of £100,000 and £125,140.
The dilemma is, do you increase pension contributions to save tax or invest the minimum so that you can raise a larger mortgage? £25,000 will equate to circa £100k of mortgage borrowing, which could be the difference between buying the perfect home.
How do mortgage lenders assess mortgage contributions?
Many mortgage lenders are understanding and can ignore pension contributions from affordability calculations. This is positive as it ensures that borrowers can take full advantage of paying into their pension without impacting their home ownership dreams.
So take advantage of your pension allowances, especially for younger borrowers where compound interest will have the greatest effect.