Concessionary Purchase Mortgages Explained: Buying a Home Below Market Value in the UK

What Is a Concessionary Purchase Mortgage?

A concessionary purchase mortgage lets you buy a property for less than its full market value — typically from a family member, employer, or landlord. The discount you receive is treated as a gifted deposit by most lenders, which means you may be able to buy with little or no cash savings of your own.

This isn’t a niche product reserved for unusual circumstances. It’s a legitimate and increasingly common route onto the property ladder, particularly for adult children buying from parents, or sitting tenants buying from a private landlord.

Who Can Use a Concessionary Purchase Mortgage?

Not every below-market-value sale qualifies. Lenders have specific criteria:

• Family sales — parent to child, grandparent to grandchild, or between siblings. Some lenders extend this to wider family members.
• Employer sales — a company selling a property to an employee, though fewer lenders accept this.
• Landlord to sitting tenant — a landlord selling to a long-standing tenant at a discount.

Key point: The seller must be genuinely gifting the discount. It cannot be a loan, and lenders will require written confirmation that the discount is not repayable.

How Does the Deposit Work?

This is where concessionary purchase mortgages become genuinely useful.

Say a property is valued at £250,000 but your parents agree to sell it to you for £225,000. That £25,000 discount — 10% of the market value — is treated as a gifted equity deposit by most lenders.

Example breakdown: 1. Market value: £250,000 2. Purchase price: £225,000 3. Gifted equity (discount): £25,000 (10%) 4. Mortgage required: £225,000 (or less if you add cash savings) 5. Loan-to-value (LTV) based on market value: 90%

Because lenders calculate LTV against the open market value rather than the purchase price, you immediately benefit from better mortgage rates than someone borrowing 100% of a property’s value.

What Do Lenders Actually Look For?

✅ Checklist: What lenders typically require

• A RICS-qualified surveyor’s valuation confirming the open market value
• A signed gifted equity letter from the seller confirming the discount is non-repayable
• Proof of relationship between buyer and seller (e.g. birth certificates for family sales)
• Standard affordability and credit checks on the buyer
• Confirmation the seller has no outstanding mortgage, or that any existing mortgage will be cleared at completion
• Solicitors acting for both parties (most lenders insist on independent legal representation for each side)

Watch out: Not all high street lenders offer concessionary purchase mortgages. You’ll likely need to approach specialist lenders or use a whole-of-market mortgage broker to find the right deal.

Stamp Duty: A Useful Saving

Stamp Duty Land Tax (SDLT) in England is calculated on the price you actually pay, not the market value. So in the example above, you’d pay stamp duty on £225,000 — not £250,000.

For a first-time buyer purchasing at £225,000 in 2026, stamp duty would be £0 (first-time buyers pay no SDLT on the first £300,000, as of current thresholds). Even for non-first-time buyers, the lower purchase price reduces the tax bill.

Note: Stamp duty rules differ in Scotland (LBTT) and Wales (LTT). Check the relevant revenue authority for current rates.

Pros and Cons

Pros: - Get onto the property ladder without a large cash deposit - Benefit from lower LTV rates even if you’re borrowing close to the purchase price - Stamp duty is calculated on the lower purchase price - Keeps wealth within the family in a tax-efficient way

Cons: - Fewer lenders offer this product — limits your choice - The seller must genuinely gift the equity; any arrangement to repay it later will be treated as mortgage fraud - The property still needs an independent valuation — you can’t just agree a price informally - Capital Gains Tax (CGT) may apply to the seller if the property isn’t their primary residence — they should take independent tax advice before proceeding - If the property has issues flagged in the survey, you’re buying at a discount but may still face repair costs

What About Inheritance Tax?

If the seller is a parent gifting equity, HMRC may view the discount as a gift for Inheritance Tax (IHT) purposes. If the seller dies within seven years of the transaction, the gifted amount could be brought back into their estate for IHT calculations.

This doesn’t mean you shouldn’t proceed — it means the seller should get proper estate planning advice first. A solicitor or independent financial adviser can help structure the arrangement correctly.

Practical Steps: Your Action Checklist

1. Agree the deal in principle with the seller and confirm the discount is a genuine gift.
2. Instruct a RICS surveyor to value the property at open market value.
3. Use a whole-of-market mortgage broker — they’ll know which lenders accept concessionary purchases and can find you the best rate.
4. Get independent solicitors on both sides — most lenders require this.
5. Request a gifted equity letter from the seller — your solicitor or broker will advise on the exact wording required.
6. Check the tax position — both buyer and seller should understand the SDLT, CGT and IHT implications before exchanging contracts.
7. Don’t skip the survey — a homebuyer’s report or full structural survey is worth every penny, especially when buying from family where emotional pressure to proceed can cloud judgement.

Where to Get Help

• MoneyHelper (moneyhelper.org.uk) — free, impartial guidance on mortgages and home buying
• FCA Register — check your mortgage broker is FCA-authorised before proceeding
• HMRC — for up-to-date stamp duty, CGT and IHT guidance
• A whole-of-market mortgage broker with experience in concessionary purchases is essential here — this isn’t a product you’ll easily arrange directly with a lender

This article is for informational purposes only and does not constitute regulated financial advice. Mortgage products and tax rules can change. Always consult a qualified, FCA-authorised mortgage adviser and an independent solicitor before making any financial or property decisions.