Mortgage for a Concessionary Purchase
Concessionary Mortgage topics covered.
- What is a concessionary purchase?
- What is a concessionary deposit?
- How does a concessionary mortgage work, will I need my own deposit?
- Steps to applying for a concessionary purchase
- Are there any limits of a concessionary purchase?
- Can I remortgage after a concessionary purchase?
- Concessionary purchase with bad credit
- Can I buy my parents house and they still live in it?
- Landlords selling property to tenants
- Open market concessionary purchase discounts
- Do I pay stamp duty on a concessionary purchase?
- Speak to a concessionary purchase mortgage advisor
Updated 5th August 2021.
Concessionary Purchase Mortgage Advisors.
Our Mortgage Experts Online accredited advisors are specialists in concessionary purchase mortgages. Furthermore, our expert’s knowledge will help you to find the right concessionary purchase mortgage on the market.
From big high street banks and building societies, to smaller more niche mortgage lenders, there is a lot of choice out there. Subsequently, this may feel completely overwhelming to you. Likewise, you may have no idea where to start. We can offer you guidance and help you navigate the complex world of concessionary purchase mortgage.
The brokers we work with are whole of market and offer completely unbiased advice, ensuring that you get the absolute best deal available.
Scroll down for more information and FAQ’s
What is a concessionary purchase mortgage?
A concessionary purchase is the term used to describe the purchase of a house/flat for less than current market value. It can also be known as a below market value purchase (BMV). Mortgages used to buy properties at below market value are commonly referred to as concessionary mortgages or BMV mortgages. Often, this kind of concessionary purchase, though not always, occurs between relatives and landlords.
This article will outline everything you need to know about getting a concessionary purchase mortgage. If you have any further questions or would like to discuss your circumstances with a mortgage expert, please do not hesitate to get in touch with our team today.
- Between family members.
- Landlord selling to tenants.
- Friends looking for a quick sale.
- Property developers offering a discounted sale price.
The degree of difficulty in obtain a mortgage will depend on the person gifting the equity, with the easiest way being from a family member. There are other factors which will affect this, the main one will be credit profile. Each lender has their own criteria around a concessionary purchase.
What is a concessionary deposit?
A concessionary purchase deposit is when the property is knowingly being purchased below the market value. Applications where solicitors are recording the purchase price as the full market value will pay stamp duty based on the actual value of the property and not the concessionary price.
How does a concessionary purchase work?
A concessionary purchase is a term used to purchase a property for less than its market value, also known as BMV – below market value. A concessionary purchase can be between anyone, however, its more commonly associated with purchasing form a family member or landlord.
Firstly, let’s have a look at how the figures would work and how mortgage lenders would assess the application. With a concessionary purchase the most straightforward example would be a son buying a property from his mum and dad:
- £200,000 Property Value.
- £30,000 Gifted Equity.
- £170,000 Mortgage Needed.
- 85% Loan to Value.
For instance, the mortgage provider would use the whole gifted equity as the deposit. Meaning the son does not have to put any of his own funds. Therefore, the mortgage lender will offer products based on 85% loan to value.
However, some lenders would require the son to put in a minimum of 5% from his own resources. Subsequently, the credit profile of the applicant will play a pivotal role in how much deposit (if any) would need to be added Your mortgage expert will be able to discuss this with you.
One key point to remember is stamp duty will need to be paid at the market value and not the actual purchase price.
When purchasing from your landlord most lenders will need a minimum 5% form your own funds and a minimum 5% reduction from the landlord. However, there are a couple of lenders who will use the full discount as the deposit. This would be dependent on your credit profile and several other factors such as income type, property type, property construction etc.
Steps to applying for a concessionary purchase.
When you are applying for a concessionary purchase mortgage you must ensure all parties are aware of their legal obligations and fully understand the implications of a concessionary purchase. Some lenders will insist on the vendor receiving independent legal advice. If you are unsure on any issue surround tax, always speak to a tax specialist before committing to concessionary purchase.
Reviewing your credit report is vital, this will give your concessionary mortgage expert all the information to be able to give you the right advice. We recommended using “Checkmyfile” sign up for a 30-day free trial. This will provide your credit information across all 3 major credit agencies.
Are there any limits of a concessionary purchase?
There is always some limitation with any type of purchase, a concessionary purchase is no different. Namely, the main point is the discount must be a gift and not a loan with no conditions attached.
When performing a concessionary purchase, the mortgage lender may insist on the seller receiving independent legal advice. This is common and nothing to be concerned about. It is to ensure the seller is fully aware of all the legal implications.
Can I remortgage after a concessionary purchase?
Generally, once you are the legal owner of the property you are entitled to remortgage. Ordinarily, most lenders have a no remortgage within 6 months of purchase rule.
Once the 6 months has passed then most high street lenders will consider you for a remortgage. In this case, contact us to get the best options for your circumstances.
Concessionary purchase with bad credit.
You can still get a mortgage for a concessionary purchase with bad credit. However, the options will be limited, and the rate will be higher.
You may also have to put in some deposit from your own funds this can be coupled with a gifted deposit from another family member in certain circumstances.
Each lender has a variety of different conditions and they use varying criteria to assess your risk and ability to repay the mortgage. Just because one lender rejects you, another could have no problem approving your concessionary mortgage application.
The expert advisors we work with are experienced in arranging concessionary purchase mortgages for people with bad credit and will be able to help you find the best deal for your circumstances.
Bad credit mortgages need more attention, and the use of a mortgage expert is essential in ensuring you get the best mortgage possible. Lastly, most bad credit mortgages can only be accessed by mortgage brokers.
Can I buy my parents house and they still live in it?
This is one question that comes up on a regular basis with concessionary purchase, the simple answer is, yes, it is possible. However, it will be more difficult. The reason for the added difficulty is because there are only a handful of lenders who will allow this scenario.
Generally, most of lenders will require the parents/grandparents etc. to move out of the property upon completion of the sale. A determining factor for this would be credit profile. The lenders who will allow this type of transaction tend to be clean credit lenders. Therefore, contact us and your mortgage expert will be able to tell you all the options available to you.
Landlord selling property to tenants.
Some tenants have been in the same property for a number of years and grow very attached to the property. Since tax regulation changed some landlords are selling properties and generally offer the tenants first refusal. Because of the relationship and the amount of time in the property they can offer the property below market value. As an example, they save time marketing the property, and with it being a private sale there are no estate agents costs involved. There are a few factors that must be considered.
- Each lender has a maximum and minimum discount accepted.
- Majority of lenders will require 5% deposit from client’s own funds.
- There are however some lenders who don’t require any deposit.
Tenants must have lived in the property over 12 months.
Open market concessionary purchase discounts.
These concessionary purchases are rare, but buyers can also receive a discount from the sellers on the open market. The lending options will also be limited compared to a normal concessionary purchase.
The reason for the discount will need to be explained and accepted by the lender. In most instances you will need to put in some of your own deposit to support this type of application.
Do I pay stamp duty on a concessionary purchase?
Yes, stamp duty is payable the same as any other property purchase (if applicable to you). There are no benefits to purchasing a property under value as the stamp duty is calculated on the sales prices and not mortgage amount. The stamp duty calculator here will have all the up-to-date information.
Speak to a concessionary purchase mortgage advisor.
There are many lenders available ranging from high street to specialist lenders. Most people go to their own bank, get declined or cannot borrow what they need. However, just because one lender has declined you, do not give up.
Our mortgage experts will look at each case before deciding which lender is right for you and your individual circumstances. Furthermore, all the mortgage brokers we work with are whole of market and offer unbiased advice. They will have access to all the specialist lenders to really enhance your chances of achieving the mortgage you need.
The expert brokers we work with have experience in dealing with all aspects of concessionary purchase mortgages, and importantly using the whole of the market to access the absolute best deals available.