Bankers in the UK are introducing a new kind of mortgage that spans generations. Apparently these types of mortgages are common in Japan and other areas, but I've never heard of them.
Parents will be able to hand down their home loans onto their children under a radical shake-up of Britain's mortgage industry which starts today.
In a revolutionary move, homeowners would never need to repay a single penny of their mortgage before they die.
Instead, the debt will be passed to their offspring, allowing them to slash the amount of inheritance tax they would have to pay.
If housing prices rise faster than the mortgage interest rate, these types of loans could be incredible investment vehicles. Stocks tend to outperform real estate, but it's a lot harder to borrow huge sums of money to purchase stocks. So what happens when you die?
For example, a parent could have an interest-only mortgage of £100,000 on their home which is worth £150,000. When they die, 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 house or repaid by other means, such as an insurance policy or the sale of other assets. If they did agree, they could continue to pay the monthly interest payments which their parents were paying before their death - and keep the house. It would have an inheritance tax perk because only £50,000 - the value of the house excluding the mortgage - would be included in their parent's estate.
Of course, a simplified tax system could eliminate the need for all these twists and turns.