What is a concessionary purchase mortgage, and can it help you buy a home? 

Millions of Brits dream of owning their own home, but a huge barrier to reaching that goal is building a deposit. 

One way to help you get on the housing ladder is to use a concessionary purchase mortgage, which usually doesn’t require you to have a traditional deposit. 

We explore what a concessionary purchase mortgage is, how it works, and the pros and cons.  

What is a concessionary purchase mortgage? 

A concessionary purchase mortgage, also known as a gifted equity deposit mortgage, can allow you to buy a home at a discounted price, usually without a deposit.  

This is because you’re buying a property at a below-market price, and the discount has been gifted. The gifted discount can be used as part or all of your deposit.  

However, some mortgage lenders may ask that you offer your own deposit or that the seller offer a minimum discount. In this scenario, you can boost the discount, which acts as your deposit, with your own funds.   

If there is a difference, this will usually be gifted to you by a family member. Other people may also be able to gift the difference, including friends or even your landlord – if the mortgage lender will allow this. 

In the case of relatives, they may want to sell at a discount to help you on the property ladder without giving a deposit.  

Alternatively, a landlord may be incentivised to do this as it typically means a quicker and cheaper sale than on the open market. 

It also means they don’t lose out on rent as you keep paying rent until you officially own it.  

How does a concessionary purchase mortgage work? 

First, you need someone willing to offer you a discount on the property they plan to sell.  

It’s important to stress that they must gift you equity by offering a discounted price that is below market value. If it’s not a gift, you can’t get a concessionary purchase mortgage. 

For example, if your parents want to sell you their £250,000 home for £200,000, you get a £50,000 discount. You can then ask a mortgage lender to accept the £50,000 as part of or your whole deposit. 

While you can buy a property to live in, you can also purchase one for buy-to-let.  

Who can offer a discount and help me get a concessionary purchase mortgage? 

You may be able to get a concessionary purchase mortgage by buying from: 

• A family member 
• A close friend 
• Your landlord 
• A developer 
• An open-market seller 
• Your employer 

It’s usually easier to get a concessionary purchase mortgage if you’re buying from family or your landlord, as they also stand to benefit.  

However, mortgage lenders may be concerned if a developer is offering a discount in case of any issues, while a discount from an open-market seller may be seen as riskier.  

What types of concessionary purchase mortgages are available?  

There are several different types of concessionary purchase mortgages available, including: 

• Family concessionary purchase mortgage 
• Landlord concessionary purchase mortgage 
• Developer concessionary purchase mortgage 
• Employer concessionary purchase mortgage 

These mostly work by allowing you to buy a property from the specified party, although the employed-focused mortgage can work differently. 

With the employer concessionary purchase mortgage, employees may be able to buy a property at a discount or with better terms, as part of their benefits package.  

Developer concessionary purchase mortgages can have some caveats, such as a limited time for discounts or for certain properties in a development.  

When looking for a mortgage, it’s always wise to talk to a qualified mortgage broker who can review your options and the right course of action based on your circumstances. 

What’s the eligibility for a concessionary purchase mortgage? 

Eligibility for a concessionary purchase mortgage can vary as it depends on: 

• The discount you’re offered and deposit 
• The condition of the property you plan to buy. If it’s seen as risky, you may not be eligible. 
• Your income and spending 
• Your planned mortgage term 

The last two are particularly important as the mortgage lender wants to ensure you can afford the monthly mortgage payments. 

As with any other mortgage, you should ensure your credit score is good and your credit report is error-free. 

While a bad credit history can lead to less favourable terms or rejection, it ultimately depends on the lender. A mortgage broker can help you find lenders who are more likely to approve your application.  

You should also consider an agreement in principle, where a mortgage lender confirms they would be happy to lend to you and how much you could, in principle, borrow.  

How much can I borrow with a concessionary purchase mortgage? 

Typically, mortgage lenders will let you borrow between four and five times your annual salary. 

However, the amount you can borrow will vary depending on your unique circumstances, including your salary, credit score, and your deposit. 

Do you have to pay stamp duty with a concessionary purchase mortgage? 

You may have to pay stamp duty, depending on the value of your property and if you’re a first-time buyer.  

Usually, you’ll pay a higher rate of stamp duty for more expensive properties. 

If you’re a first-time buyer, you pay no stamp duty on properties worth up to £425,000, while you have to pay more stamp duty if you own more than one property. 

Who offers a concessionary purchase mortgage? 

It may be harder to find a concessionary purchase mortgage than a traditional one, but some mainstream lenders, such as TSB, offer this type of mortgage. 

A mortgage broker can help you find a concessionary purchase mortgage and help you with your application, so it has the best chance of success. Unbiased can quickly match you with a qualified mortgage broker. 

When being considered for a concessionary purchase mortgage, the lender will look at the value of the property you plan to buy, require extra checks before approving your application, or ask you to prove that you’ve lived in a rental property if your landlord is offering a discount.  

Are there any alternatives to a concessionary purchase mortgage? 

If your family is keen to help you buy your own home, they could gift you a deposit instead. However, this won’t affect the price of the property you’re planning to purchase. 

This option could be useful if you are struggling to save a big enough deposit.  

What are the pros and cons of using a concessionary purchase mortgage? 

Similar to a traditional mortgage, there are many advantages and disadvantages to consider. 

The pros of a concessionary purchase mortgage: 

• You can buy a property at below market value: This means you could buy your home for a cheaper price compared to the open market.  
• You may not need a deposit: If the mortgage lender accepts the discount as a deposit, you may not need one – or you might only need a smaller one if they do require one. 
• You may be able to access more competitive mortgages: As you can get a substantial deposit via the discount, the property’s loan-to-value will be lower, allowing you to access better deals, resulting in lower monthly payments. 
• Landlords can save money and speed up the sales process: If a landlord wants to sell, they could save time and money by selling to their tenants instead of selling on the open market. 
• The property stays with the family: Not only can family members help their relatives get on the housing ladder, but they can also ensure their home stays with the family. 

The cons of a concessionary purchase mortgage: 

• You may not save on stamp duty: If you’re offered a discount on a property, you should technically pay less stamp duty. However, as many mortgage lenders view the discount as a gift, you may need to pay stamp duty on the original market price. 
• Sellers may pay capital gains tax (CGT): If the property you plan to buy has been a second home or buy-to-let, the seller may have to pay CGT on the full market value.  
• Inheritance tax may need to be paid: Inheritance tax may need to be paid by the seller if they die within seven years of the transaction. 

Need help buying your home? 

Unbiased can quickly match you with a qualified mortgage broker who can help you find the right mortgage for your unique circumstances and boost your chances of a successful application.