SIPP Mortgage Explained: How Pension Borrowing Works

A SIPP mortgage is a commercial mortgage taken out by a SIPP (Self-Invested Personal Pension) to fund the purchase of commercial property. Rather than borrowing in your personal name or through a company, the pension trustees borrow on behalf of the scheme — and the property is held within the pension wrapper, benefiting from the pension's tax advantages.

SIPP mortgages are a specialist product. Not all commercial mortgage lenders offer them, and those that do apply specific criteria relating to the pension fund, the property, and the tenancy. We work exclusively in this market and maintain relationships with the specialist lenders who are genuinely active and competitive here.

The critical thing to understand is that a SIPP mortgage is a liability of the pension scheme, not of you personally. This means lenders assess the property and the pension fund's ability to service the debt — they do not apply standard residential mortgage affordability tests or look at your personal income in the same way.

HMRC's rules for registered pension schemes restrict borrowing to a maximum of 50% of the pension fund's net asset value at the time the borrowing is drawn down. This applies across the whole SIPP — all assets count towards the calculation, not just the property being purchased.

This rule has important practical implications:

• A SIPP with £300,000 in assets can borrow a maximum of £150,000, giving total purchasing power of £450,000
• The limit is calculated at drawdown — subsequent market movements that reduce fund value do not trigger mandatory repayment
• Additional contributions to the SIPP after the mortgage is drawn increase the fund value but do not increase the loan limit retrospectively
• The 50% cap means a SIPP can never borrow more than 50% LTV on a property it is buying outright (since the property itself becomes a SIPP asset)

Our SIPP LTV Calculator helps you model different fund values and purchase prices to understand exactly what borrowing is available in your situation.

SIPP mortgages can be structured on either a capital repayment or interest-only basis, and the choice has significant implications for cash flow within the pension.

With a capital repayment mortgage, monthly payments cover both interest and a portion of the principal. The loan reduces over time and is fully repaid at the end of the term. This reduces the risk of a large refinancing obligation at term end, but requires higher monthly payments from the SIPP's rental income.

With an interest-only mortgage, monthly payments cover only the interest. The full capital must be repaid at the end of the term — either from SIPP cash reserves, property sale proceeds, or refinancing. This approach maximises the pension's cash flow from rental income in the short term. See our dedicated guide on interest-only SIPP mortgages for a full analysis of the pros and cons.

The SIPP mortgage market is specialist and relatively compact. It includes:

• Specialist commercial banks — a small number of banks have dedicated SIPP/SSAS lending desks with deep expertise in pension property transactions
• Challenger banks and building societies — some have entered this market in recent years, bringing competitive rates for certain property types
• Bridging lenders — for short-term financing needs, a growing number of bridging lenders will lend to SIPPs (see our guide on SIPP bridging finance)

Mainstream high-street banks rarely lend on SIPP mortgages. Going directly to the market without specialist knowledge often results in rejections or poor terms from lenders who are not genuinely active in this space. Our lender panel is curated specifically for SIPP and SSAS property transactions.