What is a concessionary purchase mortgage?

Full answer

A concessionary purchase (sometimes called a concessionary mortgage or family concessionary purchase) is similar in principle to a gifted equity mortgage, but the term is also commonly used more broadly to include tenants buying their rented home from a private landlord or employer at a discount, not just family sales. **How the discount is treated by lenders** When a property is sold below its independently assessed market value, most mainstream lenders will treat the difference between the sale price and the market value as if it were the buyer's cash deposit, provided certain conditions are met -- typically an independent RICS valuation confirming the true market value, and confirmation (often via a solicitor's letter) that the discount is a genuine, unconditional concession rather than a loan requiring repayment. **Common scenarios** Concessionary purchases commonly arise where a landlord sells a rental property to their existing sitting tenant at a discount to reflect the ongoing tenancy and avoid marketing costs and voids, where an employer sells a company-owned property (such as tied agricultural or hospitality accommodation) to a long-serving employee, or where a family member sells a property to a relative below market value (which overlaps closely with gifted equity arrangements). **Lender restrictions** Not all lenders accept concessionary purchases, and those that do often restrict the type of relationship qualifying for the discount (commonly limited to close family, or specific landlord/tenant or employer/employee situations), may cap the maximum discount percentage they will accept as a deposit substitute, and will usually require the seller to have owned the property for a minimum period and confirm they have no further financial interest in it after completion. **Tax implications for the seller** As with a gifted equity sale, a seller giving a concessionary discount may be treated as making a gift for Inheritance Tax purposes (if selling to a family member), and Capital Gains Tax may still be assessed on the property's full market value uplift rather than the discounted sale price actually received, if the property was not the seller's only or main residence. **Stamp Duty Land Tax for the buyer** As with gifted equity, Stamp Duty Land Tax is generally calculated on the actual price paid for the property, not its full market value, so a buyer completing a concessionary purchase at a meaningfully discounted price will typically have a lower SDLT bill than if they had paid full market value. **Worked example** A long-standing tenant is offered the chance to buy their rented house, independently valued at £220,000, for £176,000 (a 20% concessionary discount) by their private landlord. Because the discount is treated as a deposit, the tenant can apply for an 80% mortgage of £176,000 with no separate cash deposit required, and pays Stamp Duty Land Tax based on the £176,000 purchase price rather than the full £220,000 valuation. **Practical tip** Because not all lenders offer concessionary purchase mortgages and criteria vary significantly, speak to a mortgage broker early in the process to identify a suitable lender, and ensure the seller obtains independent legal advice, particularly where the transaction may have Inheritance Tax or Capital Gains Tax consequences for them.

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