Concessionary Purchase Mortgages: Helping Families Buy Property Cheap

A deposit can often be one of the biggest barriers to homeownership, especially for first-time buyers. But with a concessionary purchase mortgage, you can switch saving up for a cash deposit by using equity in the property instead.

But what is a concessionary purchase and how can it help families buy property?

A concessionary purchase mortgage is a unique option whereby you can purchase a property for a discounted price – usually from a family member – and are provided with a gift of equity that can be used with, or instead of, a cash deposit.

In this article, we explain everything you need to know about concessionary purchase mortgages, from the definition and how lenders assess these agreements to how a concessionary purchase mortgage works, including the key risks, benefits, and legal considerations. Let’s jump in.

What is a Concessionary Purchase Mortgage?

A concessionary purchase mortgage is a specific type of home loan. It is often referred to as a below market value purchase (BMV) as it is designed to make buying a property easier when the seller offers the property at a discounted price.

While there can be a variety of reasons for a seller to discount the sale of a property, a concessionary purchase mortgage is an option that is most commonly explored by families who want to sell their home to you at a discounted price.

As a mortgage option, lenders will view the discounted portion as a gift of equity, which can then count towards the total deposit amount, lowering the overall loan-to-value ratio. It is important to note that this arrangement will need to be explicitly confirmed through a solicitor’s letter stating the reduced price and relationship between buyer and seller.

A jargon-free definition: A concessionary purchase mortgage is when a property is sold below its current market value, and the difference between the sale price and the market price is recognised by the lender as a gift of equity.

For example:

• A property holds a market value of £300,000 and is sold to a family member for £240,000.
• With a signed letter of approval stating the gift of equity, the £60,000 discount will be able to count towards a deposit for the buyer.
• The buyer then needs to apply for a concessionary purchase mortgage to cover the remaining £240,000.

A crucial distinction to make is that, unlike a standard gifted deposit, a concessionary purchase requires the lender to be confident in the property’s market value. As such, the lender will often carry out their own property value assessment. Should the valuation support the discounted price, then the mortgage application can proceed as normal – just as with a traditional mortgage application.

How Do Concessionary Purchase Mortgages Help Families Save Money?

A home is a huge financial commitment and often ties up a lot of money in one asset. When a family decides to sell their property at a discounted price to a relative or loved one, that reduction does more than ease the overall cost. The discount can act as the entire deposit, removing the need for the buyer to save a large lump sum and easing a significant amount of financial pressure right at the start of the process.

In short: A concessionary purchase mortgage offers a practical way for parents to help their child or families to help their relatives onto the property ladder by reducing the pressure of saving a large deposit.

As such, one of the most common situations is when a first-time buyer completes a concessionary purchase of a parent’s house, allowing them to stay close to their family without being priced out of the local area’s rising costs.

While we use words like “discount” and “deal”, it’s important to note that the buzz word we need to pay close attention to is “Gift of Equity”. The discounted price of the property must be signed as a gift of equity for your chosen lender to accept the difference between the property’s real value and the price of purchase to be counted towards your deposit.

Here at Boon Brokers, our expert mortgage advisers can guide you through your mortgage needs, from start to finish. As a fee-free, whole-of-market broker, we compare lenders that support concessionary purchase mortgages, and help arrange and explain gifted equity documentation. No matter your mortgage needs, our dedicated mortgage experts ensure your application is professionally organised and meets your chosen lender’s criteria.

Can Concessionary Mortgages Help People with Small Deposits or Poor Credit?

Yes, a concessionary purchase mortgage can help buyers with small deposits or history of poor credit to secure a home. A common worry for many borrowers today is that a small deposit or past credit issues could prevent them from buying a home. However, a concessionary purchase mortgage is a practical solution that can help soften these challenges as the reduced sale price lowers how much you need to borrow from the start.

• How a Concessionary Mortgage Supports Smaller Deposits

The key feature of a concessionary mortgage is that it can help cover or contribute to the initial mortgage deposit through a gift of equity. As we’ve highlighted before, unlike a standard gifted deposit, the equity comes from the property itself.

As such, instead of needing to save for a generally required 10% – or even larger deposit – the buyer can instead use the difference between the property’s full market value and the discounted sale price as their deposit. In practice, the larger the gap, the more the buyer effectively receives toward their deposit.

• Help for Buyers with Poor Credit

For buyers who are specifically concerned about poor credit and are searching for the best mortgage loans for poor credit or comparing mortgage deals for poor credit, a concessionary mortgage can open up a bank of opportunities.

The main reason for this is due to the knock-on effect of receiving a discounted property price. For example, a concessionary purchase mortgage can help increase your deposit, which reduces the amount you need to borrow. In addition, a smaller mortgage is then much easier to manage, compared with taking on a larger loan, which in turn will decrease the total risk for lenders and increase your appeal as a borrower.

Ultimately, while concessionary property purchases will not repair poor credit, they can help reduce the lender’s risk and, for many first-time buyers with small cash savings, this combination will make homeownership much easier to achieve.

How Do Families Use Concessionary Mortgages to Support Each Other?

There are many benefits for families using a concessionary purchase mortgage to help loved ones get on the property ladder. The most obvious benefit is that it allows families, often parents, to support their children with a gift of equity, making it easier for them to secure a mortgage and move into their own home sooner. But beyond the financial support, it also helps keep the property within the family, and allows buyers to stay close to family, friends, and communities they know and love.

One of the most common questions we get asked at Boon Brokers is “How can family help with my mortgage?”

And while every family situation is different, there are many different ways a family can help support your mortgage. From shared ownership and joint mortgages to gifted deposits, a concessionary purchase mortgage is simply another option that allows property owners to help support their loved ones in getting onto the property ladder.

Key Benefits of Concessionary Mortgages for Families:

• The buyer can often use the gifted equity to lower their deposit requirements
• A larger deposit will create a smaller loan and reduce monthly repayments
• Keeping property in the family for long-term support or inheritance planning
• Selling to a family member ensures the home goes to someone you care about

These benefits make concessionary mortgages a popular option for families wanting to support each other while ensuring the arrangement is structured and recognised by lenders.

Do Concessionary Mortgages Encourage First-Time Buyers?

Yes, a concessionary mortgage can be a huge advantage providing a unique way for first-time buyers onto the property market.

It’s no secret that saving for a deposit can be the biggest barrier to getting onto the property ladder, and parents are always looking for unique and different ways to help their children.

As a rule of thumb, reducing the total loan amount can make it much easier to access competitive mortgage deals for first-time buyers and secure some of the best mortgage rates for first-time buyers. As a result, a concessionary purchase mortgage can help with this because the discount – or gift of equity – can be used toward the deposit, meaning you may only need to save a small amount yourself. In fact, in some cases, the gift of equity can cover the entire deposit, so you might not need to save at all.

Are Repayment Terms More Flexible with Concessionary Purchase Mortgages?

Unfortunately no, a concessionary purchase mortgage doesn’t automatically come with more flexible repayment terms. Instead, the arrangement will mainly affect the price of the property and the size of the deposit through a gift of equity.

With that said, there is once again a knock-on effect that a reduced loan amount will have on the mortgage rates and repayment terms. For example, by reducing the total loan amount you need to borrow, lenders may perceive you as less of a risk. This can make it easier to access better interest rates, more competitive mortgage deals, and smaller monthly repayments.

The actual flexibility of repayment – such as the ability to make overpayments, take payment holidays, or extend the mortgage term – will depend on the specific mortgage product you choose, not the concessionary purchase itself. Working with a trusted broker – like Boon Brokers – can help you secure the right mortgage product.

At Boon Brokers, we take the time to understand your unique requirements and situation, finding you the mortgage and lender that matches your needs. From reviewing lenders that accept gifts of equity to helping you find a mortgage with repayment terms and plans that suit your budget, our fee-free, whole-of-market approach ensures you get an arrangement that works for you and your family.

Can a Mortgage Broker Help Me Find a Concessionary Purchase Mortgage?

Finding a lender that aligns with your needs and will accept a gift of equity or discounted family sale as part of a mortgage application can be difficult. Between lender criteria, deposit calculations, and repayment options, it’s easy to feel unsure on where to start…

A trusted mortgage broker can help you take the stress out of your mortgage journey. From identifying suitable lenders and reviewing repayment terms to guiding you through your mortgage application, a broker can make the entire process simpler and easier to manage.

At Boon Brokers, our dedicated mortgage experts provide a completely fee-free, whole-of-market service. We take the time to understand your needs and compare mortgage deals across 100+ UK lenders, including those experienced with concessionary arrangements, to help you find a mortgage and repayment structure that fits both your budget and your family’s circumstances.

Looking to explore concessionary mortgage options and find a repayment plan that works for you?

Contact Boon Brokers today and let our dedicated mortgage experts help you secure the mortgage that matches your needs.