Firstly, what is a concessionary purchase? A concessionary purchase, also known as a discounted purchase, occurs when a property is sold for less than its market value. This often happens when parents sell their house to a child or a landlord sells to a tenant at a discount to the market value. The difference between the market value and the purchase price is often considered ‘gifted equity’.
The mortgage benefits of a concessionary purchase
When obtaining a mortgage for a concessionary purchase, the terms may be more favourable. Some mortgage lenders, considering the gifted equity in the discounted sale price, can offer a healthier loan-to-value (LTV) ratio. This means that the borrower may need a smaller deposit or access better interest rates.
The stamp duty implications
An important aspect to consider in a concessionary purchase is the calculation of the Stamp Duty Land Tax (SDLT). In the UK, the SDLT is calculated only on the purchase price, not the actual property value. This potentially results in significant tax savings for the buyer.
Not just for family
Concessionary purchases are becoming increasingly common, particularly among landlords and tenants. Reflecting this trend, some lenders have adapted their policies and are now accepting this type of concessionary purchase transaction.
Which mortgage lenders offer concessionary purchase mortgages?
By understanding the intricacies of concessionary purchase mortgages, Advias can help guide you through the process and find a lender that best suits your needs. Our expertise and personalised approach ensure that we can navigate the complexities of these transactions and offer you the best possible advice for your situation.
Concessionary purchases can offer significant advantages to buyers, including potential savings on SDLT and a more favourable LTV ratio. With the increasing prevalence of such transactions, it’s important to work with a mortgage broker who understands these nuances and can provide tailored advice.
Stamp duty rules change from time to time and therefore our notes may not be up to date or 100% accurate. We only refer to certain types of residential transactions and it does not constitute advice. We highly recommend taking advice and we would be happy to introduce specialist tax advisers.