Buying a house from family

Buying a house from family usually means a parent, grandparent or sibling selling you a home for less than it is worth, which lenders call a concessionary purchase. The gap between the open market value and the price you pay is gifted equity, and many lenders, though not all, count it towards your deposit. The mortgage, sometimes called a family sale or gifted equity mortgage, is assessed on your income like any other. Because you will live in the home, it is a regulated mortgage (Regulated Activities Order, article 61).

Lender loan-to-value rules, the calculator and the other concessionary routes, such as buying from a landlord, Right to Buy or buying from an employer, are on our concessionary purchase mortgages page.

Buying a house from parents, grandparents or siblings

Parents may sell to a son or daughter when they downsize, or sell a former family home or a let property, and grandparents may sell to a grandchild. Between siblings the sale may be of a share, where one buys the other out of a home they inherited or bought together. That is a transfer of equity, and some lenders treat a discount on that share as gifted equity.

Which relatives count depends on the lender. Some accept only close family, while others also accept aunts, uncles, nieces, nephews or first cousins. A discount from a stranger is an ordinary below market value purchase, where lenders generally lend on the lower of the price and the valuation.

The family discount and the gifted equity letter

A home valued at £300,000 and sold to a daughter for £255,000 carries £45,000 of gifted equity, 15% of the value. A lender that measures loan-to-value against the valuation and lends the whole price would treat that as an 85% mortgage with no cash deposit. Other lenders lend on the price only and want a cash deposit, some want a minimum discount or some money of your own, and a few do not accept family sales. You still have to pass the lender's affordability checks on your own income; on the cases we arrange, lenders usually lend up to about 5 times gross income less outgoings.

The lender's own mortgage valuation sets the gifted equity. If it puts the £300,000 home at £280,000, the gifted equity on a £255,000 price falls to £25,000 and the loan-to-value rises to about 91%. A valuation below what the family expected can mean a lower price, a different lender or more cash.

The gifted equity letter, signed by the seller, usually sets out the value, the price, the discount and how seller and buyer are related. It also confirms that nothing is to be repaid and that the seller keeps no interest in the property. Cash given towards a purchase at full price is a gifted deposit instead, covered on our gifted deposit mortgages page.

When the seller wants to stay on

Lenders that say whether the seller can stay on generally want vacant possession, with the seller moved out by completion, and many decline a family sale where the seller or a dependent relative will stay. A lender that does accept it usually asks everyone aged 17 or over who will live there without being a borrower to sign an occupier's consent or waiver. By signing, they agree that any right they have to stay comes second to the mortgage (UK Finance Mortgage Lenders' Handbook). If a parent stays on and the buyer lives elsewhere, the mortgage is normally still regulated, so it cannot be a standard buy to let.

HMRC's guidance lists giving your home to a relative while still living there as a gift with reservation of benefit, which counts towards the giver's estate for Inheritance Tax (gov.uk: Inheritance Tax on gifts). HMRC treats the discounted share of a sale below value the same way, so if the seller of the £300,000 home sold for £255,000 stays on, 15% of its value at their death counts towards their estate (HMRC: IHTM14316). The rule does not apply where the seller pays full consideration for living there, such as a full market rent (Finance Act 1986, Schedule 20, paragraph 6).

Legal steps in a family sale

1. Value the home first. An independent valuation before the price is agreed shows the gifted equity to expect.
2. Take tax advice on both sides. The seller's tax position, set out below, can change the price that makes sense.
3. Tell the lender at the start. The agreement in principle and application should say the sale is between family at a discount.
4. Instruct separate solicitors. Some lenders require separate legal representation for buyer and seller.
5. Sign the paperwork. The seller signs the gifted equity letter and any occupier's consent, and the buyer's solicitor reports the true price and the discount to the lender.
6. Complete and file the tax return. The buyer's property tax return and payment are due within 14 days of completion in England and Northern Ireland (gov.uk: SDLT), and within 30 days of the day after completion in Wales (Welsh Revenue Authority: LTT overview) and Scotland (Revenue Scotland: LBTT returns).

Everything about the price must be disclosed to the lender, and a private agreement to repay a discount described as a gift can amount to mortgage fraud.

Some lenders also ask for a solvency declaration from the seller or insolvency indemnity insurance, because a sale below value can be challenged if the seller's bankruptcy follows within 5 years (Insolvency Act 1986, section 341). Northern Ireland has the same rule (Insolvency (Northern Ireland) Order 1989, article 314), and Scotland a similar one (Bankruptcy (Scotland) Act 2016, section 98).

Tax on a family sale

Stamp duty on the price you pay

HMRC charges Stamp Duty Land Tax on the amount actually paid (gov.uk: SDLT on transfers), so a family discount lowers the buyer's tax. As at October 2026, first-time buyer relief in England means nothing on the first £300,000 and 5% on the next £200,000, with no relief on a price above £500,000 (gov.uk: SDLT residential rates). A first-time buyer paying £320,000 for a home worth £400,000 therefore pays £1,000, against £5,000 at the full value. A buyer who will own more than one home after the purchase, and is not replacing their main residence, usually pays 5% on top of the standard rates (gov.uk: higher rates).

Capital gains tax and the market value rule

A sale to a connected person is treated as not made at arm's length, so the seller's capital gains tax is worked out on the market value rather than the price. Connected persons include a spouse or civil partner, parents, grandparents, children, grandchildren, brothers and sisters, and their spouses (Taxation of Chargeable Gains Act 1992, section 286). HMRC also uses market value for anything sold for less than it is worth to help the buyer, which covers relatives who are not connected persons, such as aunts, uncles and cousins (gov.uk: CGT market value). Private Residence Relief usually means no tax where the home has been the seller's main home throughout their ownership (gov.uk: selling your home). A former home, a second home or a let property can leave a gain worked out on the full value, taxed at 18% or 24% as at October 2026 (gov.uk: CGT rates). Any tax is reported and paid within 60 days of completion (gov.uk: report and pay CGT).

Inheritance Tax on the gifted equity

HMRC's guidance gives a house sold to the owner's child below market value as an example of a gift. The discount is a potentially exempt transfer, with no tax due if the seller lives for 7 years afterwards, unless they keep living there without paying a full rent, as set out above. If they die sooner, taper relief reduces the tax on gifts made 3 to 7 years before death where gifts in those 7 years total more than the tax-free threshold, £325,000 as at October 2026 (gov.uk: Inheritance Tax on gifts).

Mortgage Lane does not give tax advice, so buyer and seller should each speak to a tax adviser or solicitor before agreeing the price.

Buying from family in Wales, Scotland and Northern Ireland

Capital gains tax and Inheritance Tax work the same way across the UK, but the purchase tax and parts of the legal process differ.

• Northern Ireland uses SDLT, with the same rates and first-time buyer relief as England. See mortgages in Northern Ireland.
• Wales charges Land Transaction Tax on the price paid, with no first-time buyer relief (Welsh Revenue Authority: LTT overview), and as at October 2026 nothing is due on the first £225,000 at the main rates (gov.wales: LTT rates and bands). A buyer who will own more than one home and is not replacing their main residence usually pays the higher residential rates, which start at 5% on the first £180,000.
• Scotland charges Land and Buildings Transaction Tax. As at October 2026, first-time buyer relief raises the nil rate band from £145,000 to £175,000, saving up to £600 (Revenue Scotland: first-time buyer relief). A buyer who will own more than one home at the end of the day of purchase, and is not replacing their main residence, usually pays the 8% Additional Dwelling Supplement (Revenue Scotland: ADS). The contract is formed by missives between the solicitors, and the duty to have a Home Report applies to a house that is on the market (Housing (Scotland) Act 2006, section 98), so a private sale may not need one. See mortgages in Scotland and first time buyer mortgages in Scotland.

Arranging a family sale mortgage

The lender is chosen on how it treats a family sale. If a discounted sale does not suit the family, a family help mortgage lets a relative's savings or property support your borrowing, and a joint borrower sole proprietor mortgage adds a relative's income without putting them on the title. The first-time buyer mortgage guide compares these options.

To start, get in touch with the price you have in mind, the value you expect, how you are related to the seller and where the seller will live after the sale.