Concessionary Purchase

How Does a Concessionary Purchase Work?

In a concessionary purchase, the lender will instruct a valuation surveyor to determine the open market value of the property. The mortgage is then assessed based on the lower purchase price, while still taking into account the equity difference as a form of deposit contribution.

For example:

• Market value of property: £300,000
• Discounted purchase price: £250,000
• Concession (equity gift): £50,000

In this case, the £50,000 difference can often be treated as the buyer’s deposit, meaning they may require a smaller or even zero cash deposit depending on the lender’s criteria.

Who Can Offer a Concessionary Purchase?

Most lenders require the seller to be a family member or close relative, although some will consider private landlords in specific circumstances.

Eligible sellers may include:

• Parents or grandparents
• Siblings
• Extended family members (depending on lender policy)
• Long-term landlords (in selected cases)

It is important to note that concessionary purchases are not typically allowed between connected commercial parties where the transaction could be considered non-arm’s length or artificial.

Key Features of Concessionary Purchase Mortgages

Concessionary purchase mortgages come with several distinct features:

1. Reduced Deposit Requirements

Because the purchase price is below market value, the discount can often be used as a deposit substitute.

2. Standard Mortgage Rates

In many cases, borrowers still benefit from standard residential mortgage rates, rather than specialist or higher-rate products.

3. Market Value Assessment

Lenders will always assess the full market value of the property, not just the discounted price.

4. Family or Connected Party Transaction Rules

Stricter underwriting applies due to the non-standard nature of the sale.

How Much Can You Borrow?

Borrowing is typically based on:

• The lower of the purchase price or valuation (depending on lender)
• Affordability checks based on income and expenditure
• Credit history and financial commitments

Many lenders will allow borrowing up to 90–100% of the discounted purchase price, provided the equity gift covers the required deposit percentage.

Are Concessionary Purchase Mortgages Regulated?

Yes. Concessionary purchase mortgages are regulated in the UK by the Financial Conduct Authority (FCA) when used for residential property. This ensures that lenders follow responsible lending guidelines and assess affordability properly.

However, the involvement of family members or connected sellers means additional documentation and verification are often required.

Required Documentation

When applying for a concessionary purchase mortgage, lenders typically require:

• Evidence of relationship between buyer and seller
• Written confirmation of the gifted equity (often via solicitor letter)
• Property valuation report
• Mortgage application and affordability assessment
• Proof of identity and income
• Solicitor confirmation that the transaction is at a genuine discounted value

Advantages of Concessionary Purchase Mortgages

There are several benefits to this type of arrangement:

✔ Lower upfront deposit requirement

Buyers can enter the property market with significantly reduced savings.

✔ Avoidance of expensive private renting

This can help younger buyers or family members get onto the property ladder earlier.

✔ Retained family wealth

Property assets can remain within the family rather than being sold on the open market.

✔ Potential stamp duty advantages

In some cases, stamp duty is calculated on the actual purchase price rather than market value, subject to HMRC rules.

Potential Challenges and Considerations

While concessionary purchases can be highly beneficial, there are important considerations:

• Limited lender availability compared to standard mortgages
• Strict underwriting criteria
• Requirement for independent valuation
• Potential tax implications depending on structure
• Legal advice is essential for both parties

It is strongly recommended that both buyer and seller seek independent legal and financial advice before proceeding.

Stamp Duty on Concessionary Purchases

Stamp Duty Land Tax (SDLT) is usually calculated based on the actual price paid, not the market value, provided the transaction meets HMRC concessionary purchase rules.

However, exceptions can apply in certain circumstances, so professional advice is essential to confirm liability.

Concessionary Purchase vs Gifted Deposit

Although similar, these are not the same:

• Concessionary Purchase: Property is sold below market value
• Gifted Deposit: Property is sold at full market value, but a cash gift is provided toward the deposit

Lenders treat these differently, and the documentation required will vary accordingly.

Which Lenders Offer Concessionary Purchase Mortgages?

Not all mortgage lenders offer concessionary purchase mortgages, and criteria can vary significantly. Specialist mortgage brokers often have access to lenders who understand these arrangements and can structure applications correctly to improve approval chances.

Working with an experienced broker is especially important due to:

• Varying lender policies
• Complex affordability calculations
• Documentation requirements
• Valuation considerations

Why Use a Mortgage Broker for a Concessionary Purchase?

Using a mortgage broker can significantly improve the chances of approval because they can:

• Match your case to lenders who accept concessionary purchases
• Structure the application correctly from the outset
• Ensure valuation and legal requirements are met
• Advise on affordability and borrowing limits
• Reduce delays and risk of rejection

Final Thoughts

A concessionary purchase mortgage can be an excellent way for families or connected parties to transfer property ownership in a financially efficient way. However, due to its specialist nature, it requires careful structuring, appropriate lender selection, and expert guidance.

If you are considering a concessionary purchase, speaking with an experienced mortgage adviser can help ensure the process runs smoothly and that you secure the most suitable mortgage product for your circumstances.