Concessionary Purchase

Concessionary Purchase Mortgages

Yes — you can buy a property below market value using a concessionary purchase mortgage, often without needing a cash deposit.

The discount you receive is treated as a gifted deposit, which can help you get onto the property ladder sooner.

Buying a home can be challenging, especially when saving for a deposit. A concessionary purchase mortgage allows you to buy a property below market value, often from a family member or landlord, using the gifted equity as your deposit.

What is a Concessionary Purchase Mortgage?

A concessionary purchase mortgage allows you to buy a property for less than its market value. 

This type of mortgage is often referred to as a below market value (BMV) purchase or a gifted equity deposit purchase. 

The difference between the market value and purchase price is treated as a gifted deposit, which can significantly reduce the amount you need to save upfront. This can be a great way to get on the property ladder with a lower deposit and can save the seller hassle in not needing to source a buyer on the open market.

When can you use a concessionary purchase mortgage?

You can usually use a concessionary purchase mortgage when:

• You are buying from a family member
• You are purchasing from your landlord
• The property is being sold below market value
• The discount is a genuine gift, not a loan

Most lenders require the seller to confirm the discount is a gifted deposit with no expectation of repayment.

Who can you buy from using a concessionary purchase?

Most lenders will only allow concessionary purchases when buying from:

• Parents or close family members
• Grandparents
• Landlords (in some cases)

Buying from non-related third parties at a discount is less commonly accepted and may require different mortgage structures.

How much can you borrow with a concessionary purchase?

Borrowing is usually based on the lower of:

• The purchase price
• The lender’s valuation

This protects the lender if the property is overvalued or the discount is not supported.

However, the gifted equity can be used as a deposit, which may allow you to:

• Borrow up to 90–95% loan-to-value
• Avoid needing a cash deposit
• Access better mortgage rates depending on the overall deal

Each lender assesses this differently, so structuring the purchase correctly is key.

Do you need a deposit for a concessionary purchase?

In many cases, you may not need a cash deposit.

The gifted equity from the seller can act as your deposit, meaning you could buy the property with little or no upfront savings.

However, some lenders may still require a small cash contribution depending on:

• Your credit profile
• The property type
• The level of discount

Each lender has different requirements, so getting advice early is important.

Why do lenders have restrictions on concessionary purchases?

Lenders apply strict rules because:

• They need to confirm the property value is accurate
• The discount must be a genuine gift
• There must be no hidden financial arrangements
• The transaction must comply with anti-money laundering regulations

Because of this, lenders often require additional documentation and legal checks.

How Concessionary Purchase Mortgages Work

Gifted Equity: The seller, often a family member or a landlord, sells the property at a discounted price. The difference between the market value and the sale price is treated as a gifted deposit.

Mortgage Application: You apply for a mortgage based on the discounted purchase price. The lender will use the gifted equity as part of the deposit. Not all lenders offer this so it’s important to work with a broker that can find you the best solution.

Valuation: The lender will require a professional valuation to ensure the property’s market value and the validity of the discount.

Benefits of Concessionary Purchase Mortgages

Easier Entry to the Property Market

Concessionary purchase mortgages make it easier for first-time buyers to enter the property market. By using the equity as a deposit, you can significantly reduce the amount of cash needed upfront. This can be beneficial to the current owners too that want to help a loved one or save themselves looking for a buyer with the potential of that transaction falling through.

Lower Monthly Payments

Since you are borrowing less money than the property’s market value, your monthly mortgage payments may be lower too. In this instance, this makes homeownership more affordable and manageable.

Family Assistance

This type of mortgage allows family members to help each other get on the property ladder without needing to provide cash gifts, which can be beneficial for both parties.

Types of Concessionary Purchase Mortgages

Family Concessionary Purchases

The most common type is when a family member sells a property to another family member at a discounted price. This helps the buyer enter the property market and can simplify the transaction process. This often happens when parents own an investment property and want to sell this to their children.

Landlord Concessionary Purchases

In some cases, a landlord might sell a property to a long-term tenant at a discounted price. This benefits the landlord by avoiding estate agency fees and securing a quick sale.

Employer Concessionary Purchases

Though less common, some employers offer concessionary purchase schemes as part of their employee benefits, allowing employees to buy properties at a reduced price.

Developer Concessionary Purchases

Property developers may offer discounts to promote sales, especially for first-time buyers. However, these can be more complex due to lender concerns about property values, so not all lenders will consider them.

Affordability and Credit Checks

Lenders will assess your affordability and credit history as with any mortgage application. They treat the gifted equity as they would any deposit so the affordability calculation remains the same as a standard purchase. See our Affordability Calculator for more information.

When might a concessionary purchase not be accepted?

A concessionary purchase may not be suitable if:

• The discount cannot be clearly evidenced
• The seller expects repayment of the gifted equity
• The relationship between buyer and seller is not acceptable to the lender
• The property valuation does not support the agreed price

In these cases, lenders may decline the application or require a different mortgage structure.

What documents are needed for a concessionary purchase?

Lenders typically require additional documentation to support a concessionary purchase, including:

• Standard income and affordability documents
• A gifted deposit letter from the seller
• Proof of relationship between buyer and seller
• Property valuation confirming market value
• Solicitor confirmation of the gifted equity

Providing clear documentation early can significantly reduce delays during the mortgage process

Potential Challenges and Considerations

Additional Deposits

Some lenders may still require an additional deposit, even with the gifted equity. This could range from 5% to 10% of the property’s value.

Legal and Tax Implications

There are potential legal and tax implications to consider. For example, the seller may be liable for capital gains tax if the property was not their main residence. It’s advisable to seek legal and financial advice to understand these implications fully.

Lender Restrictions

Not all lenders offer concessionary purchase mortgages, and those that do may have specific criteria and restrictions. Working with a knowledgeable mortgage broker like Kerr & Watson can help make sure you are speaking with the correct lenders.

Concessionary Purchase Examples

Example 

• Property Value: £300,000
• Purchase Price: £270,000
• Gifted Equity Deposit: £30,000
• Cash Deposit: £0
• Loan-to-Value (LTV): 90%

In this example, the gifted equity acts as the deposit, meaning no additional savings are required.

Conclusion

Concessionary purchase mortgages provide a valuable opportunity for buyers to enter the property market with less financial commitment in terms of a deposit. Whether you’re buying from a family member, landlord, or through an employer scheme, this type of mortgage can offer significant benefits.

Need help arranging a concessionary purchase mortgage?

At Kerr & Watson, we specialise in below market value purchases and working with lenders who accept gifted equity deposits. We’ll help you structure your application correctly and avoid delays from the start.

Speak to us today to secure the right mortgage with confidence.