Understanding Concessionary Purchase Mortgages

Buying a home can be challenging, especially for first-time buyers. However, if you have the opportunity to buy a property below market value from a relative or acquaintance, a concessionary purchase mortgage might be a solution worth exploring.

What is a Concessionary Purchase?

A concessionary purchase occurs when a buyer acquires a property at a price below its current market value. Typically, this involves the seller providing a 'discount' that enhances the buyer's affordability from the perspective of mortgage lenders. This often happens when parents or other relatives offer their property at a reduced rate to help younger family members step onto the property ladder.

How Does It Benefit You?

• Reduced Purchase Price: The buyer typically pays a discounted price, which can be significantly lower than the property's market value.
• Lower Deposit Requirements: A concessionary purchase can often reduce or eliminate the need for a large deposit, as the lender views the reduced sale price as part of the equity.
• Better Mortgage Rates: With lower loan-to-value ratios, a buyer might qualify for more favourable mortgage terms typically associated with lower risk.

An Example of Concessionary Purchase in Action

Emma and Will, a young couple, were renting a property they loved. When their landlord decided to sell due to changes in the property market, they were offered a chance to purchase it at a £50,000 discount from the market price. This enabled them to get a mortgage without the high LTV rates typically associated with first-time buyers.

Important Considerations

• Affordability Assessment: Despite the discount, lenders will still assess your ability to afford mortgage payments, considering all sources of income.
• Legal and Advisory Caveats: Ensure you obtain comprehensive professional advice to understand the implications fully, including taxes and legal responsibilities.
• Ownership Costs: Remember, homeownership includes responsibilities such as maintenance, insurance, and council taxes.

Your home may be repossessed if you do not keep up repayments on your mortgage.

The Next Steps

If you think a concessionary purchase could work for you, we’re here to help. Our team at Anderson Reed can provide tailored advice to explore this and other mortgage options. Contact us to discuss your situation and options in detail.