Mortgage with Concessionary Purchase: How does it work in the UK in 2026?

A mortgage with Concessionary Purchase is used when you buy a home for less than it is worth, usually from a family member or landlord. The discount is called gifted equityThe difference between the value of the property and the amo..., and it can often act like your deposit. Lenders still check affordability, documents, and the true market value before they offer a mortgage.

What is a concessionary purchase mortgage?

A concessionary purchasePurchasing a property at a discounted price due to certain c... mortgage UK is used when you buy a property for a discounted price (often from family or a landlord) that is lower than its true market value. The difference between the market value and the agreed purchase price is usually treated as gifted equity, which may count towards your deposit depending on the lender. You might also hear this called a mortgage for discounted purchase, gifted equity mortgage, genuine bargain price mortgage, below market value (BMV) purchase mortgage, undervalue purchase mortgage, or informally a family discount mortgage.

Your home may be repossessed if you do not keep up repayments on your mortgage. The article updated as of Jan, 22 2026.

Common situations where discounted purchase mortgages are used

Discounted purchase mortgages are most commonly used when you buy a house from parents with a mortgage or buy a house from family below market value, such as a family home sale at a discount.

They can also apply when a landlord sells to a long-term tenant at a reduced price (including some buying from landlord as a sitting tenant cases), when someone is buying inherited propertyA property inherited by a borrower. shares to buy out other beneficiaries, or when the sale is chain-free because it is agreed privately.

In some divorce or separation situations, a discounted transfer may be possible too, but it depends on the lender and how the legal paperwork is structured. If you are interested you can also contact our team of mortgage brokers to help you with mortgages.

Gifted equity vs gifted deposit: what is the difference?

This matters because lenders treat them differently.

• Gifted deposit: cash gifted to you (for example, parents gifting money into your bank).
• Gifted equity: a discount in the purchase price (the seller is gifting value, not cash).

With gifted equity, lenders usually want a signed declaration that the gift is genuine and not repayable.

Can gifted equity count as a deposit?

Yes, in many cases it can. When you are buying a property at a discount, a lot of lenders will treat that discount (gifted equity) as your deposit, so you may not need to put down the usual amount of cash.

When a cash “top-up” deposit might still be needed

Some lenders may still ask you to add cash if:

• their policy requires a minimum cash deposit
• your credit history is weaker
• the property is higher risk (for example, non-standard construction)
• the valuation is lower than expected
• the lender wants a lower loan to valueThe ratio of the mortgage amount to the value of the propert... (loan to value is often shortened to LTV)

How lenders calculate loan to value on a discounted purchase

This is one of the most important parts of the process.

Lenders look at:

• the lender valuation vs purchase price
• the size of the discount (gifted equity)
• your affordability

Some lenders calculate loan to value using the purchase price, while others can recognise the market value when gifted equity is clearly documented. Because policies vary, choosing the right lender is key.

Mortgage with Concessionary Purchase: lender checks you should expect in 2026

Even if the discount is generous, lenders still treat this as a normal mortgage application in many ways. A mortgage with concessionary purchase must pass the same core checks.

Affordability checks

Lenders check whether you can afford repayments now and if rates rise in future. This includes looking at:

• income and employment stability
• regular outgoings (loans, childcare, subscriptions)
• how you manage your bank account

Credit profile expectations

Lenders often prefer:

• limited recent missed payments
• sensible levels of unsecured debt
• stable addresses and consistent income
• clean recent bank conduct

Buying from parents mortgage criteria and relationship checks

Many lenders will ask for:

• proof of relationship to vendor (family member)
• confirmation the seller not living in property after sale (common requirement for residential purchases)
• a gifted equity not repayable declaration

What documents are needed for gifted equity?

To avoid delays, prepare these early:

• photographic identification and proof of addressEvidence of a borrower's current address, such as a utility ...
• proof of income (employed or self-employed evidence)
• bank statementsA record of a borrower's financial transactions often requir... (commonly three to six months)
• details of current credit commitmentsAny existing financial commitments, such as credit card or l...
• a copy of your credit report (so you can correct errors early)
• gifted equity letter / gift of equity letter stating:
• • the discount amount
  • it is a genuine gift
  • it is not repayable
  • whether the seller will keep any interest in the property (usually not)
• paperwork showing the agreed discounted price (the contract shows discounted purchase price)
• any mortgage lender gifted equity forms required by the lender

Legal and conveyancing points to understand

A discounted sale must be documented properly. Your solicitor will usually handle:

• confirming ownership and identity checks
• reporting the discount to the lender
• ensuring the paperwork matches lender requirements
• confirming there are no “side agreements” (for example, repayment of the discount later)

You may see terms like:

• transfer at undervalue mortgage
• conveyancing for concessionary purchase

They all point to the same idea: the legal paperwork must clearly show what is happening and why.

Stamp duty on a concessionary purchase (SDLT and other UK taxes)

Property tax depends on where the home is:

• England and Northern Ireland: Stamp DutyA tax paid by the buyer when purchasing a property. Land Tax (SDLT)
• Wales: Land Transaction Tax (LTT)
• Scotland: Land and Buildings Transaction Tax (LBTT)

In many cases, tax is based on the price paid, but your solicitor should confirm the correct treatment for your situation.

Buy to let: can you do a discounted purchase mortgage?

Sometimes, yes, but buy to let lenders often have stricter rules. They may look closely at:

• minimum deposit requirements (even with gifted equity)
• rental income stress testing
• relationship to the seller (especially with family sales)
• property type and letting plan

If you are buying from family or a landlord at a discount, a broker can quickly confirm which lenders accept that structure for buy to let.

Pros and cons

Pros

• gifted equity can reduce or remove the need for a cash deposit
• often chain-free and faster
• helps buyers when family support is available
• can work well for tenant purchases and inherited share buy-outs

Cons

• not every lender accepts gifted equity in the same way
• valuation surprises can reduce borrowing
• paperwork must be precise (gift letters and declarations)
• some cases are more complex (inheritance, divorce, sitting tenant)

Common challenges (and simple fixes)

• Valuation comes in lower than expected
  Fix: choose a lender that is comfortable with gifted equity and discuss valuation approach before applying.
• Lender requests a cash deposit
  Fix: switch lender or plan a small deposit top-up if possible.
• Seller wants to keep living there
  Fix: many residential lenders do not allow this; your broker and solicitor should check options early.
• Gifted equity letter is missing key wording
  Fix: use a clear letter confirming it is a genuine gift and not repayable.

Step-by-step: How to apply through an adviser (How-To section)

Step 1: Speak to a mortgage adviser first

Explain the discount, who the seller is, and the property value. An adviser can match you to lenders that accept gifted equity and discounted sales.

Step 2: Agree the basics in writing with the seller

Confirm:

• the agreed purchase price
• the estimated market value
• the reason for the discount
• that the discount is a gift and not repayable

Step 3: Get your documents ready

Prepare:

• identification and proof of address
• proof of income
• bank statements
• credit report
• gifted equity letter

Step 4: Submit the application

Your adviser submits to a suitable lender and explains the case clearly, including the gifted equity evidence.

Step 5: Valuation and underwriting

The lender values the home and checks affordability and credit profile.

Step 6: Solicitor work and completion

Your solicitor completes conveyancing, reports the gifted equity correctly, and completes the purchase.

Why use a broker instead of going direct?

A mortgage with Concessionary Purchase is not only about interest rates. It is also about lender policy: how they treat gifted equity, how they calculate loan to value, and what wording they need from your solicitor.

A whole-of-market adviser can:

• compare lenders with the right criteria for gifted equity
• reduce the chance of a decline due to policy mismatch
• help you prepare a clean document pack
• keep the application moving with clear underwriting notes

This usually saves time, stress, and avoids repeated credit searches from failed applications.

FAQs

Do I need a cash deposit if I have gifted equity?

Not always. Many lenders accept gifted equity as the deposit, but some still require a small cash deposit depending on policy and risk.

How do lenders calculate loan to value for a discounted purchase?

Policies vary. Some use the purchase price, others can recognise the market value if gifted equity is proven with the right documents.

What documents are needed for gifted equity?

Typically identification, proof of income, bank statements, a credit report, and a signed gifted equity letter confirming the gift is not repayable.

Is a concessionary purchase the same as Right to Buy?

No. Right to BuyThe right of council tenants to purchase their council. is a government scheme with different rules. A concessionary purchase is a private discounted sale.

Can I buy a house from my parents below market value?

Yes, many lenders allow this if the discount is documented, the legal work is clear, and you pass affordability and credit checks.

Important information

This article is for general information only and is not personal financial advice. Mortgage rules and lender criteria can change, and different lenders may treat discounted purchases differently.