The never-ending mortgage by Finance News Bulletin

Published: 18/01/07

PARENTS will be able to leave their house loans to their children under a radical campaigning of the mortgage industry starting todayIn a revolutionary move, homeowners would never require to pay back a single penny of their mortgage before they dieInstead, the debt would be passed to their progeny, allowing them to slash the amount of inheritance tax they would have to payOne expert the past nicknamed the new mortgages 'the debt that never dies' because they can continue to be passed down through the generations

Under the scheme, parents can take out a cheaper interest-only mortgage which passes to their children after their death They could also pass the mortgage on to a non-family member, such as a friend or even a colleagueThe mortgages, which are hugely popular in a few other countries such as Switzerland and Japan, go on auction in this country for the first occasion this weekA big perk of the new mortgages is that they will help parents to leave their home to their brood and cut the amount that goes to the taxman

The Kent Reliance Building civilization supposed it had been thinking for some time of launching the loan, which it is calling an 'inter-generational mortgage' Rival lenders are likely to follow with their own imitator loans if it proves popularleader executive Mike Lazenby said: 'We thought of calling it the Deathbed Mortgage but we thought that would be a bit morbid It could be the loan that never gets repaid

'It applies to interest-only mortgages, where the monthly payments wrap only the interest but do not repay any of the original loan For example, a parent could have an interest-only mortgage of £100,000 on their home which is worth £150,000When they expire, the mortgage and the house would pass to their children The children would only have to make a decision about whether or not to take on the mortgage when their parents died

If they did not want the mortgage, it could be settled by selling the home or repaid by other means, such as an insurance policy or the sale of other assetsIf they did have the same opinion, they could continue to pay the periodical interest payments which their parents were paying before their bereavement - and keep the houseIt would have an inheritance duty perk because only £50,000 - the value of the home excluding the mortgage - would be built-in in the parents' estateThe inheritance tax threshold is currently £285,000, which is proving a huge annoyance for those whose properties have rocketed in worth

James Cotton, mortgage specialist at advisers London & state, said: 'This generation of first-time buyers is having a group of problems getting on to the property ladder This is just the final extension of the 'parents helping their children' code'Interest-only mortgages have become much more popular because the monthly spending are more affordable For a characteristic mortgage of £115,000, the monthly payment would be £646

88, compared to £79455 for a refund mortgage Both info are based on an interest rate of 675%

But an interest-only mortgage can show extremely expensive Over 25 years, somebody with a £100,000 repayment mortgage with an interest rate of 55% pays back nearly £185,000 - and trimmings up owning their house, tooBut someone with a £100,000 interest-only mortgage, also at 5

5%, pays back nearly £138,000 but efficiently has no home to show for itbureaucrat figures show nearly 30% of all mortgages taken out in June were interest-only In June 2004, the figure was now 18%, according to the Council of Mortgage LendersThis is expected to increase as rising home prices force people to stretch their money to the limit to afford the biggest mortgage they can

With the average asking price of a possessions now £215,000, interest-only mortgages are the only alternative for those on lower incomes, particularly if they desire to buy in the South of EnglandFor many others, interest-only mortgages are attractive because the monthly spending are cheaper than rent, and there is a chance of the property going up in valueThis is Money's tips and recommendation can help you get the best mortgage, find a vision home or transform your house understand writing:A spokesman for the CML said: 'Inter-generational mortgages are another example of how the industry is offering even more choice to consumers

As with all loans, consumers who are considering taking out these novel products should take independent financial advice'A proprietor with an interest-only mortgage is meant to take out a separate investment which will be used to repay the mortgage in the futureIn reality, many do not bother to take one out, and simply pay the mortgage interest every monthI actually can't believe people will fall for this

Rather than extending mortgage terms to supposedly assist the poorer why not begin asking questions why persons disposable incomes and salary are lower than ever and concentrate on bringing our salaries in row with the cost of houses Then we wouldn't be relying on the banks to turn usInterest only is cheap in the short, expensive in the extended term I agree with previous comments - another way for the lenders to create money instead of my family

This is a panic gauge intended to draw our attention absent from more cost efficient measures of avoiding inheritance taxI think this is great information for some people who only think of the here and now, but every mortgage has it's pitfalls - and this is no exception When we approach to retire, we take great comfort in the information that all those years of working hard and paying off the capital and interest, will leave us with the remainder of our years mortgage gratis The CML unfortunately means that we need to continue creation monthly payments and is something you need to consider when deciding what mortgage you would benefit from the most

My chidren are my priority, and although it makes sense that the CML will not incur legacy tax, there are many ways to avoid this no matter which mortgage you have They have just found another method of lining thier own pockets, not ours

Which lender wouldn'tIf the mortgage word is long enough to pass on to your brood after death, say 50 years or more, then why would anyone take an interest only option Surely the whole point of such a extended term would be to get the monthly repayments down to an affordable level For such a long mortgage, to pay interest only you'd have to have a million pound possessions

I'm sure that will happen eventually but not for a while If the average price at the instant is £215,000, then a 50 year mortgage certainly wouldn't necessitate interest onlyI can see this type of mortgage being a competitor of the Equity Release/Lifetime Mortgage As a consumer it is another choice - which is welcome - but as a professional in the area of finance it is another option which will need discusssing with customers and recommending/discounting from the final decision

How long before the our Chancellor decides that a mortgage like this is not fair to the government as it will be deprived its split and devises a way of taxing this toohave the same opinion totally with Tim - how could a pensioner expect to meet interest repayments for potentially 30/40 years deity willing)after retirementA major problem with this is that you carry on paying the mortgage into retirement, when you can least afford it, especially given all the concerns there are about pensions at the moment If you are on a basic condition pension there would be no chance of maintaining mortgage payments and you would finish up losing your home in retirementI really can't view this as a mortgage - renting from the have an account would be a better description except the have an account doesn't have to pay to maintain the property

This is an interest only mortgage without a repayment vehicle, it's now the banks now want to wrap up it differently in order to put up for sale it as a good idea IT IS NOT - banks have been warning about I/O mortgages without refund vehicles for quite some time nowTo buy now at the obvious peak of the market will cover all you leave to your children will be negative equityThis is nothing but pure desperation on the part of mortgage lenders to keep the public borrowing cash at whatever cost

Every time a `new' means of borrowing is announced (and reviewed as `fantastic' by the CML) we should all carefully consider who will advantage from thischoose a loan term 6 months 1 year 18 months 2 natural life 3 natural life 4 natural life 5 natural life 6 years 7 years 8 years 9 years 10 yearsPlease choose a type of insurance existence insurance Home and contents Car Breakdown services Health - medical Health - dental Travel make a fuss of

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