A concessionary purchase is a term used for a property that’s purchased for less than its market value. You may have heard the term ‘BMV’ or ‘below-market value’. These terms also describe a concessionary mortgage, which is a loan used for the purchase of a property for less than its market value.
There are numerous ways to buy with a small deposit from shared ownership schemes to right to buy. Here you may have to find 5% of a property’s value and that value may already be lower as it is in a shared equity scheme. For example, a £300,000 property may have a £225,000 value attached (75% of market value) and you would then need to find around £11,000 as 5% of that shared cost.
In many UK areas, and remember we work across the UK with whole of market access, £300,000 would get you a substantial property.
But there is a way to make a purchase without a deposit – using a concessionary purchase.
Let’s take that £300,000 property as an example again.
A relative, a parent, a sibling, a grandparent agrees to sell it at Below Market Value to you for £225,000, a 75% cost. You then apply for a mortgage for this sum, based on a market value of £300,000 and you don’t have to find the £75,000 deposit as it is already factored in.
How to qualify for concessionary mortgages
Like with any mortgage, certain aspects affect your eligibility, including:
- Deposit amount. The equity in the discount matters, and you may be able to “top this up” with more more funds
- Income. Can you afford to make the mortgage repayments comfortably? This is where affordability checks come in
- Mortgage lifespan. This will depend on your age, but most lenders will lend up to age 70 (sometimes more).
- Property condition. If the property is in a state of disrepair or has been bought off plan with a discount, lender may see this as risky
Concessionary mortgages and rates
Concessionary mortgage rates are not dissimilar to regular mortgage rates.
Some lenders may use other factors to decide what rates are offered. Nonetheless, this is the same for any mortgage type and not just concessionary purchases.
It’s worth noting too that SDLT (Stamp Duty) is still applicable
Stamp duty works in the same way for a concessionary purchase as it does for regular purchases. For example, if you’re a first-time buyer and have never owned a property, you’d be exempt from paying stamp duty up to a purchase price of £425,000.
If you’re already a homeowner and are getting a second mortgage, you’d have to pay stamp duty at the following rates.
| Tax Band | Stamp duty charge |
| Less than £125k | 3% |
| £125k to £250k | 5% |
| £250k to £925k | 8% |
| £925k to £1.5m | 13% |
| rest over £1.5m | 15% |
But it’s worth remembering that with concessionary mortgages, stamp duty is charged at the discounted sale price of the property and not its market value. This can save you a lot of money, especially if you’re not a first-time buyer.
If you would like more information about concessionary mortgages, contact Sam Mason at The Mortgage and Protection Hub today.