Saving up for a deposit is often the greatest obstacle to homeownership. If you can get a mortgage for a concessionary purchase, it will allow you to put down equity rather than cash.
Concessionary purchases, also known as below market value purchases (BMV), are when you purchase a house at a lower price than the market value. This is because someone has given the difference to your family. It’s typically a relative.
A mortgage to finance a concessionary purchase can be the loan you need to make this type of transaction possible.
How It Works?
Here are the steps to purchase a concessionary mortgage.
- You might be offered a great deal by someone. Maybe your parents are looking to sell their house to you at a discount. Your landlord may want to make the selling process easier by offering you (their current tenant), a discount on the purchase price.
- You get equity as the difference between the market price and the purchase price. A gifted equity mortgage is a mortgage that allows you to make a concessionary purchase. It cannot be a loan or share in the property. It must be a gift.
- The gift can be used as a deposit toward your mortgage. You can use the difference between the market price and the price the seller offers as part of or all your down payment.
- It is possible to buy a house without needing to pay a deposit. Nice.
A property you purchase through concessionary purchase can be used as follows:
Your home
A Buy-to-Let Property (where it can be rented out to others).
How Do I Qualify For A Mortgage To Finance A Concessionary Purchase?
As with any mortgage, certain factors can affect your eligibility. These factors include:
The amount of your deposit. This includes any additional down payments you may make and the equity you received in the form discount.
Your income. Lenders need to see proof that you can pay your mortgage payments.
The average mortgage term. The UK average mortgage term is 25 years. They will want to see that you have the financial ability to pay it off quickly if you need to.
The condition of the property. They may deny your eligibility if they feel the property is too risky. This may be especially relevant if a developer has offered you a discount. Lenders will want to know why you’re so fast to sell.
Are You Able To Get A Mortgage Concessionary Loan Even If Your Credit Is Not Good?
Bad credit is not an obstacle to obtaining a mortgage or concessionary purchase. Lenders will consider your credit score only one factor in deciding whether to lend you money. There are often more factors to any story.
Not all credit problems are created equal. For example, declaring bankruptcy is not the same thing as of late payments on your credit cards.
It doesn’t matter where you are on the credit score scale, it is worth trying. Even if one lender rejects you, another lender may accept you. Different criteria are used by lenders to make their decisions. One lender may be reluctant while another lender might be willing.
What’s the bottom line? Although it can be disappointing to be shut out, it doesn’t necessarily mean that you are done.
