For a tenant buying the home they already rent, the useful number may be the gap between the agreed price and the property’s open-market value, because that gap can sometimes support a concessionary purchase mortgage. The same structure can arise when a relative sells at a discount or one beneficiary buys another out of an inherited property.
What looks like a simple discount is not treated identically by every lender. The key questions are who is giving it, how loan-to-value is calculated and whether the seller keeps any interest in the property. It is also different from a cash gift, which we explain in our guide to gifted deposits.
How Does a Concessionary Purchase Mortgage Work?
The basic structure is a purchase below open-market value, with some or all of the discount treated as equity rather than cash the buyer has saved. If a property is valued at £400,000 and the seller accepts £360,000, the £40,000 difference may be recognised by a suitable lender as gifted equity.
From a lender’s perspective, the valuation, purchase price and requested loan all matter. If a £360,000 mortgage is measured against the £400,000 valuation, it is 90% LTV; if it is measured against the £360,000 purchase price, it is 100%. Affordability still has to work separately, as we explain in our mortgage affordability guide.
Who Can Use a Concessionary Purchase Mortgage?
Current lender criteria cover several types of discounted sale, but acceptable relationships differ. Halifax currently considers specified family purchases and sitting-tenant purchases at a genuine discount of at least 10%, with at least 12 months’ tenancy for the sitting-tenant route. Accord states that it accepts qualifying purchases from family members, landlords and ex-partners.
Why does the relationship matter? Lenders need to know that the discount is genuine, that it is not repayable and that no retained interest undermines their security. Aldermore’s current criteria include close-family and landlord-to-tenant sales, while its maximum discount rules differ between those two routes.
How Do Lenders Assess a Concessionary Purchase Mortgage?
The central issue is how each lender converts the discount into deposit and LTV. Published criteria differ enough that the same purchase can fit one lender’s policy but require more cash, a different structure or a different lender elsewhere.
| Lender | Who may qualify | Lending basis | Current published point |
|---|---|---|---|
| Aldermore | Close family or sitting tenant | May lend up to 100% of discounted price where equity covers the required deposit | Maximum discount stated as 50% for inter-family and 25% for landlord-to-tenant sales |
| Halifax | Specified family, partner or ex-partner, or sitting tenant | Open-market value used for product selection and LTV | Genuine discount of at least 10% |
| Accord | Family, landlord or ex-partner | Maximum LTV based on valuation | Loan cannot exceed discounted purchase price; solicitor confirmation required |
| Bank of Ireland | Residential cases subject to criteria | Usually lower of price or value; valuation used where discount is at least 25% | Published buy-to-let criteria do not accept concessionary purchase prices |
For a buyer, this is why lender selection cannot be reduced to the interest rate alone. We would normally want the seller relationship, expected valuation, discount, occupancy position and required loan clear before comparing products.
What Does the Discount Look Like in Numbers?
Take a Wimbledon buyer purchasing a relative’s property valued at £400,000 for £360,000. The £40,000 reduction is a 10% discount. If the lender accepts that equity in full and lends £360,000 against the £400,000 valuation, the case sits at 90% LTV with no cash deposit; a lender using the £360,000 price as its LTV base would view the same loan very differently.
What Happens to Stamp Duty and Tax?
In England and Northern Ireland, SDLT is generally based on chargeable consideration, which in a simple purchase normally means the amount paid. Current first-time buyer relief applies where the price is no more than £500,000, with 0% on the first £300,000 and 5% on the portion from £300,001 to £500,000. On a £360,000 qualifying purchase, that is £3,000. Our Stamp Duty guide covers the wider bands.
For the seller, HMRC says market value may be used when calculating a capital gain if property is sold for less than it is worth to help the buyer. Company transactions can also have specific SDLT market-value rules. Scotland and Wales use different property taxes, so the conveyancer or qualified tax adviser should confirm the transaction-specific position rather than treating every discounted sale the same.
What Documents and Legal Checks Matter?
A clean paper trail matters because the lender and conveyancer are testing different risks. Evidence may include the relationship or tenancy, the agreed discount, a lender valuation and confirmation that the equity is a genuine gift rather than a loan. Some lenders also require the seller to vacate on completion.
Aldermore currently requires separate legal representation plus a gifted equity and solvency declaration and an appropriate Insolvency Act indemnity policy on qualifying cases. Accord requires a solicitor’s letter confirming the reduced price, vendor and relationship. For buyers new to the process, our first-time buyer mortgage guide sets the wider purchase steps in context.
What Other Routes Might Be Considered?
A discounted sale is only one form of family support. A cash gifted deposit keeps the purchase price at market value, while a joint borrower sole proprietor mortgage can bring another person’s income into the affordability assessment without necessarily adding them to the property title.
Another route is a guarantor-style structure, which we cover in our guarantor mortgage guide. A standard high-LTV mortgage may also remain possible where the buyer has sufficient cash. Ownership, affordability, tax, legal rights and what the supporting person intends to give or retain all need to be considered side by side.
In Summary
A concessionary purchase mortgage can make a below-market sale workable by allowing an accepted discount to count as equity, but the treatment is lender-specific. The relationship, valuation basis, tenancy history, seller occupancy, affordability and legal documentation all matter, so a £40,000 discount should not be assumed to function identically with every lender.
Frequently Asked Questions
The questions below cover the points we most often need to separate when a property is being sold below market value.
Can a concessionary purchase mortgage remove the need for a cash deposit?
Yes, in some cases a concessionary purchase mortgage can allow accepted gifted equity to replace all of the buyer’s cash deposit. That depends on the lender’s LTV method, minimum discount, affordability assessment and the relationship between buyer and seller.
Can I buy my rented home from my landlord at a discount?
Yes, several lenders currently consider landlord-to-sitting-tenant purchases. Some require a minimum tenancy period or minimum discount, so the tenancy history and lender criteria need to be checked before an application is made.
Can I buy a property from my parents below market value?
Yes, family sales at a genuine discount are accepted by a number of lenders. The seller will usually need to give up the gifted equity without repayment or a retained financial interest, and lender definitions of acceptable relatives vary.
Does the seller have to move out after completion?
Often, yes. Several published lender policies require the person giving the equity to vacate and retain no interest in the property, although the exact rule depends on the lender and relationship involved.
How is the property value established?
The mortgage lender will rely on its valuation process rather than simply accepting the price agreed between buyer and seller. If the lender’s valuation is lower than expected, the usable equity and resulting LTV can change.
Is Stamp Duty based on the discounted price?
For a straightforward purchase in England or Northern Ireland, SDLT is generally based on chargeable consideration, which is normally the price paid. Special rules can apply to other structures, including some company transactions, so the conveyancer or tax adviser should confirm the position.
Can a discounted purchase affect the seller’s Capital Gains Tax?
Potentially. HMRC states that market value can be used when calculating a gain where property is sold for less than it is worth to help the buyer, although available reliefs and the seller’s circumstances determine whether tax is actually due.
Will the discount increase how much I can borrow?
Not automatically. Gifted equity can improve the LTV position, but the requested mortgage must still pass the lender’s affordability and credit assessment, and different lenders can calculate the transaction differently.
A below-market purchase can be straightforward once the relationship, valuation, legal position and lender treatment all line up. Where one element is unclear, resolving it before a full application can prevent the discount itself from becoming the source of delay.
