There are some exiting developments in the mortgage market with the birth of a new mortgage designed in order to allow home owners to pass on their mortgage debt in the event of their death. Whilst some people might think this is a rather odd thing to do, read on for the full story:-
The new inter-generational mortgage surely to be known by something less tongue-twisting is a product which has the promise of parents being able to pass on the mortgage debt on their home to their children, whilst considerably reducing the amount of inheritance tax paid on their estate.
The way in which this works is simple. Say, for example, the parents home is worth 250,000. The mortgage on this could be 150,000. Because this is an interest-only mortgage, the debt doesnt reduce and the monthly repayments are purely interest. On the death of the parents, the house and its mortgage would pass on to their children. As there is a debt on the house, its value, excluding the mortgage, would only be 100,000 and this would be included in the parents estate as far as inheritance tax is concerned. Inheritance tax allowance rises annually. For the year 2006/7 this allowance is...
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