What is a concessionary purchase mortgage?

A concessionary purchase mortgage is a home loan used to buy a property for less than its market value. The discount is usually provided by the seller (often a family member), and the difference between the market value and the purchase price may be treated as gifted equity.

Because the lender needs to be confident the discount is genuine and properly evidenced, concessionary purchase mortgages often involve more scrutiny and paperwork than a standard purchase.

Concessionary purchase vs below-market-value (BMV)

You may see the same idea described in different ways:

• Concessionary purchase: buying at a reduced price due to a discount.
• Below-market-value (BMV) purchase: the purchase price is below the property’s market value.
• Gifted equity: the discount is treated as equity provided by the seller rather than cash paid by the buyer.

In practice, the mortgage is still assessed like any other application. The key difference is that the lender will focus closely on how the discount affects loan-to-value (LTV) and whether the arrangement is acceptable.

How concessionary purchase mortgages work

A concessionary purchase mortgage generally follows the same broad stages as other residential mortgages—affordability checks, property valuation, and underwriting. The main difference is how the lender evaluates the discount.

1) Lenders typically assess LTV using market value

Most lenders consider the property’s market value (what it’s worth) rather than only the discounted price.

That means the lender will look at:

• the market value supported by valuation evidence
• the purchase price you’re paying
• the difference (the discount)

This matters because lenders’ maximum LTV rules are applied based on the value they accept.

2) The discount may be treated like a deposit (gifted equity)

Where the discount is accepted as gifted equity, it can work in a similar way to a deposit contribution.

This can reduce how much cash you need to bring to completion—but only if the lender accepts the discount as gifted equity and the overall LTV outcome fits their approach.

3) The discount must be structured as a genuine gift

For the discount to be treated as gifted equity, lenders generally expect it to be non-repayable and not create a financial interest for the seller after completion.

In other words, the arrangement should be set up so it’s clear the seller isn’t effectively “getting their money back” later through a mechanism that undermines the gift.

If the discount is linked to conditions that look like repayment, shared financial interest, or future claims over the property, lenders may take a different view.

Example: how gifted equity can affect the deposit

If a property has a market value of £200,000 and you purchase it for £180,000, the discount is £20,000.

That £20,000 may be treated as gifted equity, which could reduce the cash you need as a deposit—subject to the lender’s rules and the valuation.

What lenders look for (and why it can be more complex)

A concessionary purchase mortgage isn’t automatic just because a discount exists. Lenders often require additional information to understand:

• why the property is being sold at a discount
• who the seller is (relationship and circumstances)
• how the discount is documented
• whether the discount is a gift rather than a loan
• whether the valuation supports the market value used for LTV

As a result, the process can be more document-heavy than a typical purchase mortgage.

Common scenarios for concessionary purchases

Concessionary purchases tend to fall into a few categories. The clearer and more straightforward the reason for the discount, the easier it can be to evidence.

Family concessionary purchases

Often the seller is a parent or close relative offering a discount to help you buy. Lenders may want clarity on how the arrangement is set out and that the discount is properly evidenced as a gift.

Landlord concessionary purchases

If you’re buying from a landlord who is willing to sell at a discount, lenders may request evidence relating to the tenancy and the discount arrangement.

Employer or other non-family discounts

Discounts from employers or other parties can be possible, but they may attract extra scrutiny because lenders may question why the price is below market value and whether the seller retains any financial interest.

Developer or open-market discounts

Discounts that are not clearly connected to a family relationship or tenancy can be harder to support. Lenders may be cautious if they suspect the discount is compensating for issues with the property rather than reflecting a genuine market-based reduction.

Application process: what to expect

The application process is broadly similar to other mortgages, but you should expect additional steps around the discount.

In general, you may need to:

1. Complete the usual mortgage application information

   • identity and income details
   • affordability information
   • property details

2. Provide evidence of the discount

   • documentation showing the purchase price and discount
   • confirmation that the discount is a gift (not repayable)
   • details of the relationship and circumstances (where relevant)

3. Support the lender’s valuation and due diligence

   • the lender may carry out its own valuation
   • additional reports or questions may arise depending on the situation

4. Confirm the deposit position and LTV outcome

   • even with gifted equity, some lenders may still require additional cash deposit depending on their approach

Risks and considerations

A concessionary purchase mortgage can be a practical route to homeownership, but it’s important to understand the potential downsides.

More lender scrutiny

Because the discount affects LTV and underwriting, lenders may request more evidence and take longer to reach a decision.

Legal and documentation requirements

The arrangement needs to be structured and evidenced properly. If the discount isn’t clearly documented as a gift, it may not be accepted.

Tax implications (often for the seller)

Concessionary purchases can have tax consequences depending on the circumstances and how the transaction is structured. It’s important to get advice based on the specific facts.

Impact on the seller

A discounted sale can affect the seller’s finances and planning. Considering the broader implications for both parties can help reduce the chance of delays or misunderstandings.

Tax considerations to be aware of

Tax treatment varies depending on the seller’s circumstances and the nature of the transaction. Common areas to consider include:

• Stamp duty (buyer’s position can depend on the sale price and structure)
• Capital gains tax (CGT) (may apply to the seller)
• Inheritance tax (IHT) (in some family discount scenarios, future planning may be relevant)

Tax is complex, so specialist guidance is often the most reliable way to understand how the transaction could be treated.

Alternatives to concessionary purchase mortgages

If a discounted sale isn’t available or the lender doesn’t accept the arrangement, there are other ways families can support a purchase, such as:

• gifted deposits (cash gift rather than gifted equity)
• guarantor arrangements
• joint mortgage structures (where appropriate)
• shared ownership

Each option can change how the lender views risk and deposit requirements.

A concessionary purchase mortgage can help buyers purchase with support from a discount, particularly where the seller’s reduction can be evidenced as a genuine gift. Understanding how lenders assess the discount and preparing for the additional documentation can help the process run more smoothly.