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A mortgage that parents can pass on to children

Kent Reliance last week launched a ground-breaking mortgage that allows parents to pass on their interest-only mortgage to their children.

The inter-generational mortgage aims to help first-time buyers get on the property market, as well as slash the amount of Inheritance Tax the children would need to pay.

Kent Reliance says it is more of a change in product criteria that allows the standard interest-only mortgage to be passed down, rather than a new product. But it technically means the loan could be handed from generation to generation without a penny of the actual debt ever being repaid.

The mortgage, which can also be passed on to non-family members such as friends or colleagues, has been a success in Switzerland.

Mandip Ghattaora, spokeswoman for Kent Reliance, says there is no obligation for children to pay off the debt and they could instead choose to sell the property.

She says: ‘The mortgage offers flexibility. We decided to do it after one of our members came to us wanting to know the options for an interest-only mortgage. This type of mortgage has been a success in Switzerland and we thought it would be a good idea. We’ve already had lots of calls about it.”

Ghattaora stresses that it will constantly be reviewing cases to make sure the product is suitable for the client and falls in line with Financial Services Authority requirements.

Alison Rolls, spokeswoman for Norwich and Peterborough, says that anything that helps more first-time buyers and reduces Inheritance Tax is a good thing, but it will not be rushing to do a similar product.

She says: “We would never say never, but this one is a bit of a culture shock. The thought of passing your debt on to your children is unusual.”

Jonathan Cornell, technical director at Hamptons Mortgages, says: “It’s good to see lenders thinking outside the box. I’m not sure how popular it will be with people, but it’s an innovative concept that could lead to greater things.”

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