Many people are under the illusion that you must always save a traditional cash deposit to buy a home, even if purchasing the property at a significant discount. In reality, a concessionary purchase mortgage can work very differently.
When you are buying from a landlord or purchasing a family discounted property, the price reduction itself may be treated as your deposit. This is known as gifted equity, and in many case lenders will accept that built in equity instead of requiring you to produce cash savings. In practical terms that means some buyers can complete a purchase at undervalue with little or no personal deposit, provided the numbers stack up against the lender’s Loan-to-Value criteria.
This is where many borrowers ask “Can I use gifted equity as a deposit for a concessionary purchase?” The answer is often yes; but only if the lender is satisfied that the discount is genuine, non-repayable, and supported by an independent market valuation.
The critical point is this: not all lenders treat a concessionary purchase the same way. Policies vary significantly depending on:
- Who is selling the property
- Your relationship to them
- The percentage discount being applied
- Whether the vendor intends to remain in the property
- How the lender calculates Loan-to-Value
For the right borrower, a concessionary purchase mortgage can remove one of the biggest barriers to homeownership; the need to save a large upfront cash deposit. But navigating lender differences is essential.
What is a Concessionary Purchase?
A concessionary purchase (or a “purchase at undervalue”) occurs when a property is sold below its full open market value, usually by a family member or landlord. The difference between the agreed sale price and the property’s market valuation is known as gifted equity and in many cases this equity can be used in place of a traditional cash deposit.
For example:
- A property is valued at £250,000
- A parent agrees to sell it to their child for £225,000
- The £25,000 discount becomes gifted equity
- The lender may treat that £25,000 as the buyer’s deposit
In this scenario the buyer is effectively securing a mortgage at 90% Loan-to-Value, despite not contributing cash savings. This is why a gifted equity mortgage can be particularly powerful for first time buyers purchasing from parents, tenants buying from a landlord, families looking to transfer properties and buyers who have affordability but limited deposit savings.
However, eligibility is not automatic. Lenders typically require:
- An independent valuation confirming market value
- Standard affordability and credit checks
- A formal gifted equity declaration confirming the discount is non-repayable. Halifax mandates a minimum 10% discount which must not be subject to future repayment, clawback or retained interest terms.
- In almost all circumstances the vendor must vacate the property on completion. Both Bath Building Society and Aldermore will not accept applications where the gifter intends to remain in the property.
What Are The Rules Surrounding Landlord-to-Tenant Sales?
A growing number of buyers ask whether they can purchase the property they currently rent, particularly when the landlord is open to a direct sale without estate agent involvemnet.
A landlord to tenant mortgage can absolutely be possible, but lender appetite varies considerably. If you are buying from your landlord, there are additional criteria to consider.
Length of Tenancy
Many lenders prefer the tenant to have lived in the property for a minimum period. Halifax, Aldermore and Vida Homeloans all require this period to be a minimum of one year. A long standing tenancy can strengthen the case for a concessionary purchase mortgage as it demonstrates stability and familiarity with the property.
Discount Limitations and LTV Caps
If the landlord is offering a reduced price, lenders will want to verify the discount is legitimate and not artificially inflating the value elsewhere in the transaction. Vida Homeloans may limit the maximum advance to 95% of the discounted purchase price, or 75% of the market valuation, whichever is lower.
Relationship and Independence
Some high street lenders are cautious if there is a personal relationship beyond a standard commercial tenancy. In these cases, specialist lenders may be more accommodating.
Do I need a cash deposit when buying from my landlord?
In many cases, the answer is no – provided the agreed sale price is sufficiently below market value and the lender accepts the difference as gifted equity. However, certain lender may still require small personal contributions, especially where credit history is imperfect or affordability margins are tight.
Family Purchases and Gifted Equity
A large proportion of concessionary purchase cases arise within families. Parents selling to children, grandparents transferring property, or even wider family discounted property transactions are common scenarios where a concessionary purchase mortgage may be appropriate.
Lenders tend to apply additional safeguards in family transactions because the risk profile differs from an arm’s length sale. These may include:
- Acceptable Relatives: Aldermore and Halifax will consider parents, children, grandparents, siblings, aunts/uncles, foster parents or legal guardians (including step-relatives). Foundation Home Loans restricts this to immediate family members only.
- Deposit Rules: Chorley Building Society may allow 100% of the purchase price to be funded by the mortgage (subject to a maximum 90% LTV of the open market valuation). Barclays explicitly requires the applicant to put down a 5% deposit from their own resources.
When structured correctly, a concessionary purchase mortgage within a family can eliminate the need for a case deposit, reduce overall borrowing risk and help families transfer property tax-efficiently (subject to independent tax advice), but lender criteria differ significantly; particularly around maximum LTV.
LTV Limits by Lender Comparison
Loan-to-Value limits are one of the most important moving parts in a concessionary purchase mortgage.
| Lender | Maximum LTV Rules & Limits | Specific Constraints |
| Aldermore | Up to 100% of discounted price | Max 50% discount for family, 25% for landlords. Equity gift must cover full deposit. |
| Vida Homeloans | 100% of discounted price OR 75% of market valuation (lower of the two) | Landlord-to-tenant is capped at 95% of discounted price. |
| Santander | LTV based on Market Value (if >20% discount & family) | Requires at least 10% equity based on market value. |
| Chorley BS | Up to 100% of purchase price | Subject to a maximum 90% LTV of the open market valuation. |
| Barclays | LTV based on the lower of valuation or discounted price | Minimum 5% deposit from applicant’s own resources is mandatory. |
Key technical point: If a property is valued at £300,000 and sold for £270,000, the lender assessing at 90% LTV may allow borrowing up to £270,000 (90% of £300,000). In that case, the buyer technically needs no additional cash deposit because the gifted equity covers the shortfall.
However, some lenders cap lending at 90% of the discounted price instead, while others impose minimum borrower contribution requirements. This variation is why comparing lender policy is critical.
The “Specialist” Differentiation
When dealing with a concessionary purchase mortgage, the gap between mainstream High Street policy and specialist lender criteria can be the difference between an immediate decline and a smooth approval.
Why Can High Street Lenders Be Restrictive?
Traditional banks often apply rigid rules around:
- Maximum Loan-to-Value on a purchase at undervalue
- Acceptable family relationships
- Buying from landlord scenarios
- Minimum borrower cash contributions
- Previous credit history
For example, some lenders will not accept a gifted equity mortgage at all unless the vendor is a parents. Others may refuse applications if the seller has owned the property for less than six months. And some will assess LTV against the discounted price rather than the full valuation, effectively removing the benefit of the equity gift.
From a risk perspective this caution is understandable. But this is where specialist lenders approach the situation differently.
How Do Specialist Lenders Assess Concessionary Purchases?
Specialist lenders tend to focus less on rigid categorisation and more on overall risk profiling. This means looking at:
- True market valuation
- Strength of borrower income
- Sustainability of affordability
- Clarity of gifted equity documentation
- Intent of the seller
In many cases, they are more comfortable with:
- Landlord-to-tenant transactions
- Broader family discounted property arrangements
- Complex income structures
- Historic credit blips
- Higher LTV concessionary purchase mortgage cases
Rather than rejecting a case because it falls outside a narrow policy box, specialist lenders assess the full picture, which is crucial when structuring a purchase at undervalue.
The real differentiation is not just access to lenders, but knowing which lender’s interpretation of risk best fits the scenario. Because with concessionary purchase mortgages, placement is everything.
Final Considerations for Concessionary Purchase Mortgages
A concessionary purchase mortgage can be one of the most effective yet misunderstood routes into home ownership. Whether you are buying from a landlord, purchasing a family property at a discounted price, or exploring whether you can use gifted equity as a deposit, the opportunity exists, but only if the structure aligns with lender policy.
Concessionary purchase scenarios essentially comes down to three main eligibility factors:
- The Relationship: Lenders will scrutinise whether you are buying from a clearly defined close family member or an established landlord.
- Occupancy: The vendor must almost always agree to vacate the property upon completion.
- Deposit Source: Depending on the lender, your discount can act as your entire deposit, but some will still mandate a 5% cash contribution from your own savings.
At AALTO, we work with a panel of over 100 lenders, including specialist building societies and manual underwriters who assess the full context of a case rather than relying purely on automated systems. This allows us to help clients navigate complex scenarios; whether that involves a family discounted property, a landlord-to-tenant purchase, or other gifted equity scenarios.
If you are considering a concessionary purchase, speaking to a broker early can help clarify what lenders may accept and how best to structure the application. Contact AALTO to explore your opinions and ensure your purchase is positioned correctly from the outset.
