Updated 11th January 2022.
Introduction to concessionary purchases.
We love concessionary purchases, the calls we receive about concessionary purchase are normally from people who have already invested time and money into the property. This means the client is invested in the property both financially and emotionally.
In this concessionary purchase article, we will explain the mortgage options available to you, and answer some of the most frequently asked questions.
We are passionate about helping you to get onto the property ladder, to find out the latest information on concessionary purchase, click on the enquiry form or call us.
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 mortgages.
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
Concessionary Purchase Mortgage Topics
- 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
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. This can also be known as a below market value purchase (BMV).
Often, a below market value mortgage occurs between relatives and landlords.
This concessionary mortgage 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.
Examples of some types of concessionary mortgages:
- Between family members.
- Landlord selling to tenants.
- Friends looking for a quick sale.
- Property developers offering a discounted sale price.
The person gifting the equity will affect the degree of difficulty in obtaining the mortgage.
When the gifted equity is from a family member this is the simplest route
One main factor which will affect the mortgage application will be your credit profile.
Each mortgage lender has their own criteria around a concessionary purchase.
What is a concessionary purchase deposit?
A concessionary mortgage deposit is when you are purchasing a property below market value and using equity within the property as a deposit.
Concessionary mortgage applications where solicitors are recording the purchase price as the full market value, means you will pay stamp duty based on the actual value of the property, and not the concessionary purchase price.
If you are looking to use a concessionary deposit, then contact us to see how we can help you.
How does a concessionary purchase mortgage work?
A concessionary purchase mortgage is a term used to purchase a property for less than its market value, also known as BMV – below market value.
A concessionary mortgage deposit can be between anyone, however, its more commonly associated with purchasing from a family member or landlord.
Firstly, let’s have a look at how the figures would work, and how mortgage lenders would assess the mortgage application.
£200,000 Property Value.
£30,000 Gifted Equity.
£170,000 Mortgage Needed.
85% Loan to Value.
In this instance, the mortgage provider would use the whole gifted equity as the deposit. As such, there wouldn’t be any funds needed towards the deposit. Therefore, the mortgage lender will offer products based on 85% loan to value.
There will be some mortgage lenders who insist on a minimum of 5% deposit coming from the client’s own funds.
Subsequently, the credit profile of the applicant will play a pivotal role in how much deposit (if any) would need, your mortgage expert will be able to discuss this with you.
Stamp duty payable is on the market value, and not the concessionary purchase price.
When purchasing from your landlord, most mortgage lenders will need a minimum 5% from 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 type of concessionary deposit will 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 mortgage.
When applying for a concessionary mortgage all parties must be aware of their legal obligations and fully understand the implications of a concessionary purchase.
Mortgage lenders will insist on the vendor receiving independent legal advice. If there is any uncertainty on any issue surround tax, always speak to a tax specialist before committing to a concessionary purchase.
Concessionary mortgage lenders will ask for the latest 3 months bank statements for your personal and business accounts (if self-employed).
They will be looking to see if your income received in the bank matches your pay slip. For self-employed clients, is your declared income sustainable, based on the current self-employed income being received.
The biggest concern for any concessionary mortgage lender is missed/returned direct debits. This is often a sign of financial difficulty or poor money management.
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 mortgage, 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?
After the 6-month ownership period has passed, remortgage options will be widely available, this also includes a product transfer if allowed by your current mortgage lender.
You will also be able to remortgage to raise capital such as, debt consolidation or home improvements. Whatever your circumstance the concessionary purchase mortgage experts will be experienced in helping you achieve your goals.
Concessionary purchase with bad credit.
You can still get a mortgage for a concessionary purchase mortgage with bad credit. However, the concessionary mortgage rates for clients with bad credit will be higher. You may also have to put in extra deposit from your own funds. The extra deposit can be used in conjunction with a gifted deposit from another family member.
Each mortgage lender has a wide variety of different concessionary mortgage conditions, and they use varying criteria to assess your risk, and ability to repay the mortgage. Just because one mortgage lender rejects you, another could have no problem approving your mortgage application.
The mortgage advisors who we work with, specialise in arranging mortgages for people with bad credit. Bad credit mortgages need more care and attention, and the use of a mortgage expert is essential in ensuring you get the best concessionary mortgage possible.
Specialist mortgage lenders also known as intermediaries have access to bad credit mortgage lenders.
Can I buy my parents house and they still live in it?
This is one question that comes up on a regular basis with a concessionary mortgage, the simple answer is, yes.
It is possible but there will be less options available. The reason for the added difficulty is because there are only a handful of lenders who will allow this scenario.
When a concessionary purchase is between family member whilst they remain in the property there can sometimes be issues if the family members are experiencing financial difficulties, this is known as a distressed sale and mortgage lenders won’t lend when this is happening.
Generally, most of lenders will require the parents/grandparents 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 agent’s 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 mortgages 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 concessionary discount, will need explaining and the mortgage lender to agree to it.
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 mortgage?
Yes, however, this will depend on your situation. The best source of information is always from the government website https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property#gift
You may need to pay SDLT when all or part of an interest in land or property is transferred to you and you give anything of monetary value in exchange.
Anything of monetary value that you give in exchange is called the ‘chargeable consideration’.
The rules you use to work out how much SDLT you pay depend on the circumstances of the property transfer.
If you’re left land or property in a will
If you get land or property under the terms of a will, there’s no need to tell HMRC and you will not pay SDLT. This applies even if you take on an outstanding mortgage on the property on the date the person died. This is on condition that no other consideration is given.
You’re given property as a gift
If you get property as a gift you will not pay SDLT as long as there’s no outstanding mortgage on it. But if you take over some or all of an existing mortgage, you’ll pay SDLT if the value of the mortgage is over the SDLT threshold.
A husband decides to transfer a half share in a property he owns to his wife. He does not take a cash payment for this share, but there’s an outstanding mortgage on the property. The amount outstanding is more than the current threshold, so SDLT is payable, even if the husband keeps the mortgage. He must tell HMRC about the transaction.
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 banks mortgage advisor who declined them. or they cannot borrow what they need. However, just because one lender has declined you, do not give up.
Our concessionary experts will look at each case before deciding which lender is right for you and your individual circumstances.
Furthermore, all the concessionary mortgage brokers we work with are whole of market and offer unbiased advice.
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.