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Should you invest your pension in buy-to-let?

Annuity rates are low, bonds are paying next to nothing – when thinking about retirement planning many are now looking at buy-to-let.

All hail the Granlord – the latest economic powerhouse.

Film fans of a certain generation might be forgiven for thinking that Granlord is a character from Star Wars.

Quite the reverse in fact, a so-called Granlord is a recent term given by the media to a new British economic phenomenon.

Granlords are property owners who are already retired and may think about using the new pension freedoms to cash in their pension to use as a deposit on a buy-to-let property.

Many are really quite elderly, even in their 80s and may soon be enjoying new professional lives as landlords, keeping their tenants happy.

Figures from the Department for Communities and Local Government, quoted by the Nationwide, show that it was only in 2013 that the over-65s became the highest age group for homeownership and the only one which is still growing today.  House_pic_Mortgage_blog_125806499

Juxtapose that with the same statistics at the other end of the scale which shows the 25-34 year olds are still declining as homeowners, inferring that they are renting more and more. So perhaps it is not surprising with years of low interest rates and an equity market which is volatile and possibly expensive that pensioners are turning again to the property to find consistent income in retirement and some potential capital growth.

Buy-to-let mortgages are more expensive than ordinary home loans but can be obtained regardless of the age of the mortgagee because the rental yield will cover the repayment loan.

Buy-to-let does require a substantial deposit, however, usually at least 25-40 per cent and potential landlords should beware of fees which can affect the price of a mortgage.

Of course, the usual rules apply to anyone contemplating it. Do lots of research for the right property and the right location, do your numbers correctly and shop around.

It is also a good idea to speak to a mortgage adviser and an independent financial adviser who will help you understand if buy-to-let fits into your retirement plan.

But for those who have made the leap, it looks like the Granlords will be around for many a year yet.

By Steve McDowell

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