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Product matters

It is difficult to look at the Kent Reliance intergenerational mortgage as a product as it is more of an initiative.

This idea is long on concept and short on detail. The only place I managed to find information on this mortgage is in the press as the Kent Reliance website had no information and its press office was unable to help.

It is a loan with no repayment date. Borrowers will be able to take out a 25-year interest-only loan and after the end of the 25-year period they will be able to extend it for a further 25 years.

The borrower keeps paying the interest payments but is under no obligation to repay the capital.

The loan is transferable so when the borrower dies, it can be passed on to someone else or paid off with the sale proceeds of the dead person’s property.

This may potentially save inheritance tax if the loan is passed on as well as the property.

While these mortgages are popular in places like Japan, I am not sure if the UK is ready for them.

Having a 50-year loan may make great sense for Kent Reliance’s mortgage book and profitability but borrowers would pay huge amounts of interest over such a long period.

What happens if the inheritor of the property cannot afford to take on the mortgage?

How do the borrowers maintain their interest repayments when they are retired?

I think it is good to see lenders coming up with new ideas. However, I do not think we will see other lenders following this idea yet.

Jonathan Cornell is technical director at Hamptons International


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