Independent financial advice - the never ending mortgage
Take independent financial advice about the new 'never ending' mortgage
No fixed time limit
The concept behind the intergenerational or 'never ending' mortgage is that it has no fixed time limit for repayment. It is an interest only mortgage but there is no end-date when the lump sum is due to be paid, and so it is in theory an everlasting mortgage. If you'd like to know more before you take independent financial advice, read on.
The reason for this type of mortgage
The intergenerational mortgage already works well in Japan, Ireland and Switzerland, so is a proven way of financing a property. Independent financial advice reports that with the property ladder being inaccessible to so many these days, the intergenerational mortgage would make home buying more affordable to many more people. And the reason it is called 'intergenerational' is because you can pass your mortgage, together with the property, on to your children.
The advantages
In the UK we are obsessed with home ownership, particularly as a way of passing an asset down to our children. But with the rise in property prices, many more people now fall into the 40% inheritance tax bracket. Essentially this means that if you have paid off your mortgage, 40% of the value of your home will belong to the taxman when you die.
Taking out an intergenerational mortgage would mean that, because your home is technically still the property of the mortgage lender, this wouldn't be liable for inheritance tax (although the balance of the value of the property would be liable if it was over the amount specified by the Treasury at that time - independent financial advice can keep you abreast of tax regulations).
Passing your mortgage on to your beneficiaries means that they could take independent financial advice on whether to continue the interest only payments, or to sell the property and redeem the mortgage.
The disadvantages
The first and most obvious disadvantage is that it seems cruel to pass debts on to your loved ones. But this is a mental hurdle rather than a reality, because the worst case scenario would be that they would take independent financial advice regarding selling the property to redeem the mortgage.
Critics of the intergenerational mortgage point out that given that we have an increasingly elderly population, it is entirely possible that the beneficiaries could also be of retirement age with their own mortgages by the time they inherit your property.
Independent financial advice also cautions that policy holders might find themselves severely restricted financially if they are committed to paying a mortgage in retirement.
You can have a brighter financial future. If you would like independent financial advice about intergenerational mortgages call our experienced advisers today on 01424 777 156 or e-mail mike.robertson@mraltd.com
