inheritance and a mortgage

[jenwilkinson]

my mum has given me the chance o buy her house. it is currently worth �280,000. we have the chance to buy it for �140, 000 the rest being given as my inheritance. How would this work with a mortgage? we have no capital so will need a mortgage for the full �140000. would this be classed as a 50 or 100% mortgage? im confused if it will be the smaller then how do we get around the deposit or can that be stated in the contracts that the vendor is paying that?

Thank you in anticipation of a reply

[Ethel]

Any mortgage company would be happy to give a �140,000 mortgage on a house valued at �280,000.

All they care about is the ability to recover their money if you default in the payments.

However, you are entering a legal minefield and need to get proper advice from a solicitor.

[dancecaller]

Make sure your solicitor gives advice on the inheritance tax aspect . Not all solicitors are expert in this side of things.

[jake-the-peg]

The rules on inheritance tax changed recently. It used to be that it was if you were given something "as inheritance" and the person survived 7 years it was not liable for tax. Now if your mother "continues to derive benefit" from the house. That is to say lives in it then it's still liable for inheritance tax.

If this is a tax evasion plan you may have been given out dated advice.

This arrangement sounds complex from the tax perspective under the new rules if she'll still be living there without paying rent.

[Priesty]

Alot of lenders will shy away from this as its a consessionary purchase (a sale at an undervalue). If you have no capital then you need a mortgage of 140k on a property worth 140k, so it will be a 100% mortgage. The only 2 lenders I know who will do this are Platform (part of Britannia Building Society) or TMB (part of the HBOS group), either way, these lenders are only available to brokers, so you may need to speak with one.

[Priesty]

Ooooooooh and you'll have to kick her out the house

[dzug]

or charge her rent

Given that the value of the house is (just) less than the Inheritance Tax threshold, you may not need to worry too much about that - depending on what other assets she has and how much the house appreciates relative to the threshold going up.