What are the legal implications of buying my mother's house at a discounted rate?

Posted on 24 March 2008

Hi Katie,

My mother (66 years old) is the owner of a property worth £135,000 (circa). My sister and I are thinking of purchasing it from her for £45,000 (a third of the value). She will continue to live there. Any possible legal implications?

Hi,

Yes if you're buying with a mortgage then you would still need to provide a cash deposit as a lender would not be able to consider the 'real' value, they take the property value as what you buy for, i.e. the £45,000, and probably agree to lend you £40,000.  However, this is worth arguing, so go to a broker as we can negotiate with lenders to specially accommodate the full £45,000 loan for you.

As for the legals, you'll have to speak to a solicitor, but for a start, if your mother dies in the next 7 years, you could still be liable for inheritance tax, calculated from 40% on a reducing scale over the 7 years, on the discount gift she gave.

 

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