Concessionary purchasing is a term that refers to the purchase or sale of a house for less money than its market price. It is also known by the term “below market value purchase” (BMV). Concessionary mortgages and BMV mortgages are mortgages which can be used for properties that have a lower market value. This type mortgage for a concessionary purchase can be made between relatives but is not always.
There are several types of concessionary Mortgages. We have listed them below.
Parental/family concessionary Mortgages
Many parents are conscious of the challenges and costs their children face in today’s market. They want to help. Family Concessionary Purchases enable them to do this.
Concessionary mortgages to landlords
A landlord may offer to rent the property at a reduced price to their tenants, much like their parents. They may be looking to save money and avoid dealing with the hassles of selling the property. Or, they might recognize the value of the rent paid, especially for long-standing tenants.
Like gifted equity deposits mortgages with caveats, landlord concessionary mortgages are subject to many lenders’ approvals.
• The discount can’t be lower than a specific percentage (typically 5-10%)
• Lenders might ask borrowers to contribute at most 5% of their personal cash
• Before a BMV-mortgage can be agreed upon, some lenders require that a tenant has lived in the house for at least one calendar year.
• The landlord discount mortgage lenders are few and far between. They will not offer a concessionary Buy-to–Let mortgage to borrowers who wish to move out of the property and then rent it to someone else.
Mortgage applications can be more complicated when buying below market value. Some lenders won’t allow you to be involved.
Some lenders will accept the discounted purchase price as a down payment, but may also ask the buyer for a larger deposit. Some lenders stipulate that the agreed purchase price represents the true value and will require a deposit. This is regardless of whether the property is worth a million or if it is being purchased for a pound.
Employers can offer property concessions
An employer can also offer to sell the property to an employee for below market value. To avoid any disputes over ownership, it is possible for an employer to sell a property to an employee at below market value. This is done by a waiver.
Developer concessionary purchase discounts
Developers are able to offer buyers a concessionary purchase coupon (also known as a “developer discount”) on the market price of one of their properties. This can make it more difficult to find lenders willing to lend mortgages for these types of properties, especially if you are looking at new constructions.
Lenders will need to know the reasons why the developer is willing or able to offer a discount. Although it might be just because the developer needs to sell quickly, lenders will want to know why the developer is selling at a discount.
Concessionary purchase discounts in the open market
On the open market, buyers can receive discounts from sellers. This is somewhat rarer, and again it will be difficult to find a lender willing loan in situations like this. The lender will need information about why the discount is being offered.