---
title: "Concessionary Purchase Mortgages, Gifted Equity as a Deposit"
description: "Concessionary purchase mortgages for buying from family, your landlord or employer below market value: the discount as your deposit, Right to Buy and the tax."
url: "https://mortgagelane.com/mortgages/concessionary-purchase-mortgages"
site: "Mortgage Lane"
collection: "mortgages"
date: "2026-10-08"
author: "Joseph Lane"
category: "Mortgages"
reviewed: "2026-10-08"
reading_time: "37 min"
byline: "Joseph Lane"
author_credentials: "CeMAP · FCA authorised firm"
language: "en-GB"
robots: "index,follow"
---

# Concessionary Purchase Mortgages, Gifted Equity as a Deposit

Concessionary purchase mortgages for buying from family, your landlord or employer below market value: the discount as your deposit, Right to Buy and the tax.

Concessionary purchase mortgages for buying from family, your landlord or employer below market value: the discount as your deposit, Right to Buy and the tax.

[Concessionary purchase](https://mortgagelane.com/definitions?term=concessionary-purchase)

Residential

A sale of a home below its market value to someone the seller has a connection with, such as a relative, a sitting tenant or an employee. The discount, called gifted equity, can count towards the buyer's deposit with lenders that accept it.

[Read the full definition of Concessionary purchase](https://mortgagelane.com/definitions?term=concessionary-purchase)

## Expert advice on concessionary purchase mortgages

Speak to a Mortgage Lane adviser about your options.

## In short

A concessionary purchase mortgage is assessed like any residential mortgage, on your income, outgoings and credit history, with the seller's discount standing in for some or all of the cash deposit. Lenders differ on whether they measure the loan against their valuation or against the price you pay, and that choice decides how much cash you need.

## What is a concessionary purchase mortgage?

**A [concessionary purchase](https://mortgagelane.com/definitions#def-concessionary-purchase) is buying a home below its market value from someone you have a connection with, such as a parent or other relative, your landlord or your employer, and a concessionary purchase mortgage lets the discount, known as gifted equity, stand in for some or all of the deposit.** On illustrative figures, a home worth £300,000 sold by a parent to their son or daughter for £255,000 carries £45,000 of gifted equity, 15% of the value. With a lender that works out the [loan to value (LTV)](https://mortgagelane.com/definitions#def-loan-to-value) on its own [valuation](https://mortgagelane.com/definitions#def-mortgage-valuation) and lends up to the price, the buyer borrows £255,000 at 85% LTV and needs no cash deposit, although fees and purchase costs still have to be paid. With a lender that works on the price paid, a 90% maximum means a loan of £229,500 and £25,500 of the buyer's own money.

The mortgage itself, often called a concessionary mortgage, is an ordinary residential mortgage, and the buyer's income, outgoings and credit history are assessed as on any purchase. A mortgage to an individual on a home that the borrower or a close relative will live in is normally a [regulated mortgage contract](https://mortgagelane.com/definitions#def-regulated-mortgage) ([Regulated Activities Order, article 61](https://www.legislation.gov.uk/uksi/2001/544/article/61)), and the lender and the broker work under the Financial Conduct Authority's conduct rules ([FCA Handbook: MCOB](https://handbook.fca.org.uk/handbook/mcob)). No money changes hands for the deposit, so the lender relies on its own valuation to confirm the value, on written confirmation from the seller that the discount is a gift, and on its solicitor's checks that the sale is what it appears to be.

Any purchase at less than the lender's valuation is a [below market value](https://mortgagelane.com/definitions#def-below-market-value-mortgage) purchase. For an ordinary sale between strangers, lenders generally lend on the lower of the price and the valuation, so a bargain price does not replace the deposit. The concessionary rules apply where the seller knowingly passes part of the value to the buyer, and our page on [BMV mortgages](https://mortgagelane.com/mortgages/bmv-mortgages) covers the difference. A [Right to Buy](https://mortgagelane.com/definitions#def-right-to-buy-mortgage) discount for a council tenant in England works in a similar way under each lender's own Right to Buy rules. A discount that stays with the home for every later buyer, such as [a First Homes discount](https://mortgagelane.com/mortgages/section-106-mortgages), is a condition attached to the home, and lenders assess it under their rules for that scheme.

Where buyer and seller are relatives, the sale is also not at arm's length for tax. The buyer's purchase tax is charged on the price paid, while the seller can be taxed as if they had sold at full value, so both sides take advice before the price is agreed. Where the family help is cash towards a purchase at the full price, [gifted deposit mortgages](https://mortgagelane.com/mortgages/gifted-deposit-mortgages) covers it.

Mortgage Lane arranges concessionary purchase mortgages for sons and daughters buying a parent's home or former home, grandchildren and other relatives buying family property, tenants buying from their landlord, council tenants using Right to Buy, employees buying from an employer and relatives buying out a family member's share. Most of the work is matching the type of sale and the size of the discount to the lenders whose current criteria accept them, and checking how much cash each of those lenders would need.

### England, Wales, Scotland and Northern Ireland

Lenders across the UK treat gifted equity in the same broad way, but the legal steps and the purchase tax differ. England and Northern Ireland charge [Stamp Duty Land Tax](https://mortgagelane.com/definitions#def-stamp-duty-land-tax) and Wales charges [Land Transaction Tax](https://mortgagelane.com/definitions#def-land-transaction-tax). In Scotland the sale is agreed through [missives](https://mortgagelane.com/definitions#def-missives) between the solicitors and the tax is [Land and Buildings Transaction Tax](https://mortgagelane.com/definitions#def-land-and-buildings-transaction-tax), with first-time buyer relief of its own, which our page on [first-time buyer mortgages in Scotland](https://mortgagelane.com/mortgages/first-time-buyer-mortgages-scotland) covers. Right to Buy ended for council and housing association tenants in Scotland on 31 July 2016 ([gov.scot: council housing](https://www.gov.scot/policies/social-housing/council-housing/)) and in Wales on 26 January 2019 ([Welsh Government: Right to Buy to end in Wales](https://www.gov.wales/right-buy-end-wales-month)). Northern Ireland Housing Executive tenants have their own House Sales Scheme, described below. Our pages on [mortgages in Scotland](https://mortgagelane.com/mortgages/mortgages-scotland) and [mortgages in Northern Ireland](https://mortgagelane.com/mortgages/mortgages-northern-ireland) cover the wider differences.

## Concessionary purchase mortgage rates

**Concessionary purchase mortgage rates are set by each lender and priced mainly on the loan to value that the gifted equity produces.** Lenders price in loan to value bands. With a lender that measures the loan against its valuation, a 20% discount puts the buyer in the 80% band although no cash has changed hands. With a lender that works on the price paid, the band depends on the cash deposit, and a larger discount does not move the buyer to a cheaper band. Fewer lenders accept concessionary purchases than ordinary purchases. Some accept family sales only, some set a minimum or maximum discount and some exclude new build homes, so a case can come down to weighing the rate against whether a lender accepts that type of sale and that size of discount. Income, credit history and the property affect the price as on any mortgage, and product fees vary in the same way.

Plans to [remortgage](https://mortgagelane.com/definitions#def-remortgage) soon after buying need checking at the start. Some lenders apply a [six-month rule](https://mortgagelane.com/definitions#def-six-month-rule): for a remortgage within six months of purchase they use the lower of the price paid and the current valuation, which on a concessionary purchase is the discounted price. The first product may also carry an [early repayment charge](https://mortgagelane.com/definitions#def-early-repayment-charge). Our [fixed term mortgages](https://mortgagelane.com/mortgages/fixed-term-mortgages) page explains how fixed rates are priced.

**Buying from family, your landlord or your employer?** Get in touch with the agreed price, the value you expect and how you know the seller. The lender is chosen on how it treats that type of sale.

## Concessionary purchase mortgage criteria

**Lenders check the same points on every concessionary purchase, and each sets its own limits for them.** Two rows in the table rest on published rules, as at October 2026: Right to Buy (gov.uk) and regulation (the Regulated Activities Order). The other rows describe how lenders' criteria differ, with examples from single lenders' published criteria checked on 8 October 2026. Those limits change often, and the lender's underwriting decides each case. The [affordability](https://mortgagelane.com/definitions#def-affordability) row is Mortgage Lane's experience: 5 times gross income after commitments is the standard multiple on the cases we arrange, up to 6 times for professionals and specialist products.

## Concessionary purchase mortgage criteria

*Concessionary purchase mortgages: criteria*

| Criterion | How it works |
| --- | --- |
| Who can sell | Family sales are accepted most widely, and which relatives count varies: some lenders include aunts and uncles, others only parents, children, brothers and sisters and grandparents. Some lenders accept a landlord selling to a sitting tenant, and fewer an employer selling to an employee or a former partner selling a share. |
| The lender's basis | Some lenders work out the loan to value on their valuation and cap the loan at the discounted price, so the gifted equity can replace the cash deposit. Others work on the price paid, so the buyer needs a cash deposit whatever the discount. |
| Maximum loan to value | Set by each lender. One lender's published criteria allow up to 90% of the open market value, with the loan capped at 100% of the discounted price. |
| Minimum discount or cash deposit | Some lenders set a minimum discount, or ask for cash from the buyer when the discount is small. One lender accepts a 5% discount with a 5% cash deposit, or a 10% discount with no cash deposit. |
| Maximum discount | Some lenders cap the discount. One lender considers a discount of up to 50% on a family sale and up to 25% of the valuation on a landlord sale. |
| The gift | The discount must be an unconditional gift, with no repayment, clawback or share kept by the seller, confirmed in writing by the seller, a solicitor or both. |
| Valuation | The lender instructs its own valuation, and the discount it recognises is measured against that figure. |
| Seller staying on | Some lenders require the seller to move out on completion. Others allow an occupier who signs the lender's consent form, and decline where the seller is given a lifetime tenancy. |
| Landlord sales | Some lenders require a minimum tenancy, such as at least one year for at least one of the buyers. |
| Solicitors and solvency | Some lenders require separate solicitors for buyer and seller, a declaration that the seller is solvent, or insolvency indemnity insurance. |
| Property and use | Usually the buyer's own main residence. Some lenders exclude new build homes and homes with a resale price covenant. |
| Right to Buy (England) | Assessed under the lender's Right to Buy rules. For applications made from 21 November 2024 the maximum discount is the lower of 70% of the value and a regional cap of £16,000 to £38,000. |
| Affordability | The buyer's income and outgoings, as on any purchase. In our experience 5 times gross income after commitments is the standard multiple, up to 6 times for professionals and specialist products. |
| Regulation | A mortgage to an individual on a home the borrower or a close relative will live in is normally a regulated mortgage contract. |

The Right to Buy row is from gov.uk and the regulation row from the Regulated Activities Order, checked 8 October 2026. The affordability row is Mortgage Lane's experience, not a market rule. The examples in other rows are single lenders' published criteria checked 8 October 2026, not a list of the lenders we use, and they change often; each lender's current criteria and underwriting decide a case.

## Types of concessionary purchase, and how each is assessed

**Each type works the same way, with a discount standing in for the deposit, and each seller relationship has its own lender rules and tax points.**

### Family sales

Typical family sales are a parent selling a son or daughter the family home or a former home, a grandparent selling to a grandchild, or one sibling buying out another. Lenders accept family sales more widely than any other type of concessionary purchase. Lenders want the discount confirmed in writing as an unconditional gift and want to know where the seller will live, and some ask for separate solicitors and a declaration that the seller is solvent. Which relatives count differs from lender to lender. Most of the tax falls on the seller, who can pay capital gains tax as if the home sold at full value and makes a gift for [Inheritance Tax](https://mortgagelane.com/definitions#def-inheritance-tax). Our guide to [buying a house from family](https://mortgagelane.com/guides/residential/buying-a-house-from-family) covers buying from parents, the gifted equity letter, a parent staying on after the sale and the legal steps, and the worked example below shows the lender arithmetic.

**Get in touch** with the price, the value you expect and where the seller will live.

### Buying from your landlord as a sitting tenant

A tenant buying the home they rent can be offered a discount because the landlord avoids some of the costs of an open market sale, such as estate agent's fees, rent lost while the home stands empty and the time it takes to obtain [vacant possession](https://mortgagelane.com/definitions#def-vacant-possession). A let home can also be worth less to an investor with a tenant in it, and a landlord may price the sale against that lower figure. Lenders that accept a sale to a sitting tenant treat the discount as gifted equity measured against their own valuation, and some ask for a minimum tenancy, such as at least one year for at least one of the buyers. Other lenders accept family sales only. The lender may ask for the tenancy agreement to show how long the tenancy has run, and the landlord confirms the discount in writing as on a family sale.

**Get in touch** with the tenancy agreement and the landlord's offer.

### Right to Buy

Council tenants in England, and some housing association tenants whose homes were transferred from a council, can buy their home at a statutory discount after 3 years with a public sector landlord ([gov.uk: Right to Buy](https://www.gov.uk/right-to-buy-buying-your-council-home)). The discount is 35% of the value for a house and 50% for a flat, rising with the years as a tenant to 70%, and for applications made from 21 November 2024 it is capped at £16,000 to £38,000 depending on the area ([gov.uk: Right to Buy discounts](https://www.gov.uk/right-to-buy-buying-your-council-home/discounts)).

Lenders that accept Right to Buy usually treat the discount as the deposit and lend up to the discounted price, each with its own maximum against the market value, and some do not lend on Right to Buy at all. Some or all of the discount is repayable on a sale within 5 years, and for 10 years the home must first be offered back to a social landlord ([gov.uk: selling a Right to Buy home](https://www.gov.uk/right-to-buy-buying-your-council-home/selling-your-home)).

Changes announced on 28 April 2026, including a 10-year qualifying period and lower percentage discounts, were not law as at October 2026 ([gov.uk: Right to Buy overhaul](https://www.gov.uk/government/news/right-to-buy-overhaul-to-safeguard-social-housing)). The Social Housing Bill that contains them passed the House of Lords and had its Commons second reading on 10 September 2026 ([Hansard: Social Housing Bill second reading](https://www.theyworkforyou.com/debates/?id=2026-09-10a.1252.0)).

Northern Ireland Housing Executive tenants can use the House Sales Scheme after five years as a secure tenant, with a discount of 20% of the value rising to 60% or £24,000, whichever is lower ([nidirect: House Sales Scheme](https://www.nidirect.gov.uk/articles/house-sales-scheme)). Our [Right to Buy mortgages](https://mortgagelane.com/mortgages/right-to-buy-mortgages) page and the guide to [the Right to Buy discount as a deposit](https://mortgagelane.com/guides/right-to-buy-mortgages/discount-as-a-deposit) cover the scheme in full, and [mortgages on ex-council flats](https://mortgagelane.com/mortgages/mortgage-on-an-ex-council-flat) covers buying such a home later on the open market.

**Get in touch** with your landlord's offer notice under section 125 of the Housing Act 1985, which sets out the value, the discount and the price.

### Buying from your employer

Employers sometimes sell homes to staff at a discount, for example housing kept for key workers or a property an employee already lives in. Fewer lenders accept a sale from an employer than a family sale, and those that do treat the discount as gifted equity in the same way. A discount the employer can claw back if you leave is not an unconditional gift, and lenders that require one may decline it. The discount can also be taxable as a benefit of the job, covered under tax below.

**Get in touch** with the employer's terms and any conditions attached to the sale.

### Buying out a family member's share

Where a home is already owned jointly within a family, one owner can buy out another's share for less than it is worth, and the discount on that share works as gifted equity on the new mortgage with lenders that accept it. At one lender, owners on the title can discount their own share as long as any owner who is not giving a discount receives full value. The change of ownership is a [transfer of equity](https://mortgagelane.com/definitions#def-transfer-of-equity), usually with a remortgage in the buyer's name, and Stamp Duty Land Tax can be due on any money paid and on the share of the mortgage taken over. Some lenders also accept a former partner selling their share at a discount, while others treat a buy-out on separation as an ordinary remortgage. Our [single person mortgages](https://mortgagelane.com/mortgages/single-person-mortgages) page covers taking a mortgage into one name.

**Get in touch** with the current ownership, the share being bought and the mortgage balance.

### Buying to let, or for a relative to live in

This page is about homes the buyer will live in. Buy to let lenders are generally stricter about discounted purchases: one buy to let lender's criteria checked on 8 October 2026 will not consider a property bought for more than 10% below market value, except from a recognised developer. A mortgage to an individual is normally regulated in the same way as one on the borrower's own home if a close relative, such as a parent, child, brother, sister, grandparent or grandchild, will live in at least 40% of the property. A purchase from a parent who then rents it back is therefore not a standard buy to let.

**Get in touch** with who will live in the home and the price agreed.

## How lenders treat the discount

**Lenders measure the loan against either their valuation or the price paid, and the size of the discount then decides the loan to value band or the cash needed.** A lender on the valuation basis divides the loan by its valuation and lends no more than the price, so the gifted equity fills the gap between the loan and the value. A lender on the price basis applies its maximum to the price, so a 90% maximum means a 10% cash deposit on the price however large the discount. Some lenders combine the two, working from the [open market value](https://mortgagelane.com/definitions#def-open-market-value) but asking for some cash from the buyer as well. The table shows a home valued by the lender at £300,000 at four prices, with a 90% maximum at both kinds of lender.

## Gifted equity and the cash needed on a £300,000 home

*Concessionary purchase mortgages: gifted equity and the cash needed on a £300,000 home*

| Price | Gifted equity | Loan, lender using the valuation | Buyer's cash, lender using the valuation | Loan to value on the valuation | Buyer's cash, lender using the price |
| --- | --- | --- | --- | --- | --- |
| £285,000 | £15,000 (5%) | £270,000 | £15,000 | 90% | £28,500 |
| £270,000 | £30,000 (10%) | £270,000 | £0 | 90% | £27,000 |
| £255,000 | £45,000 (15%) | £255,000 | £0 | 85% | £25,500 |
| £240,000 | £60,000 (20%) | £240,000 | £0 | 80% | £24,000 |

Illustrative arithmetic on hypothetical figures, worked with the calculator on this page. Both lenders are assumed to have a 90% maximum loan to value, and the lender using the valuation caps the loan at the price. Fees, purchase costs, affordability and product rules are left out. Not an offer of finance.

With a 5% discount the 90% maximum on the valuation is the limit, so even the lender on the valuation basis needs £15,000 from the buyer. From a 10% discount upwards that lender needs no cash deposit, while the lender on the price basis needs 10% of the price in every row. Fees and purchase costs come on top in both cases.

### When the valuation comes in lower

The lender's valuer reports the market value on the lender's instructions, and the gifted equity the lender recognises is the difference between that figure and the price. If the valuer puts the £300,000 home at £280,000, the gifted equity on a £240,000 price falls from £60,000 to £40,000 and the loan to value rises from 80% to 85.7%. A lender with an 85% maximum would then lend £238,000, leaving the buyer to find £2,000, agree a lower price or use a different lender. A [down valuation](https://mortgagelane.com/definitions#def-down-valuation) can also take the discount below a lender's minimum, so the sale no longer counts as a concessionary purchase with that lender. Agreeing the price after an independent valuation helps both sides, although the lender's own figure is the one it lends against. Our guide to a [mortgage declined after valuation](https://mortgagelane.com/mortgages/mortgage-declined-on-valuation) covers what happens when a valuation goes against a case.

### Confirming the gift

Lenders ask for written confirmation that the discount is a gift. That is usually a letter or declaration from the seller setting out the value, the price, the discount and the relationship, and confirming that there is no repayment, no charge and no share kept in the property. Some lenders ask instead for a solicitor's letter confirming the reduced price, the seller's name and the relationship. In England and Wales the conveyancer acting for the lender works to the [UK Finance Mortgage Lenders' Handbook](https://lendershandbook.ukfinance.org.uk/lenders-handbook/englandandwales/), which requires them to ask how the balance of the price is being provided and to report it where the money is not the buyer's own. Scotland has its own version. Lenders also differ on how the sale is documented, for example at the reduced price or at full value with the discount recorded as a gift of equity, so the lender's requirements are confirmed before the contract is drawn up.

Everything about the price must be disclosed to the lender. A private arrangement to repay a discount described as a gift, or a price recorded differently from the one agreed, can amount to mortgage fraud, and a lender that finds out can decline the application or withdraw its offer.

### The seller's solvency

Some lenders ask for a declaration that the seller is solvent, insolvency indemnity insurance or separate solicitors for buyer and seller, because a gift can be undone if the seller later goes [bankrupt](https://mortgagelane.com/definitions#def-bankruptcy). In England and Wales a trustee in bankruptcy can apply to the court to set aside a transaction at an undervalue made in the five years before the bankruptcy application or petition. For a transaction in the last two of those years no proof of insolvency is needed. For one made earlier, the trustee must show that the seller was insolvent at the time or became so because of the sale, and for a sale to a relative that is presumed unless shown otherwise (Insolvency Act 1986, [section 339](https://www.legislation.gov.uk/ukpga/1986/45/section/339) and [section 341](https://www.legislation.gov.uk/ukpga/1986/45/section/341)). A declaration of solvency made at the time of the sale is evidence against that presumption, which is why some lenders ask for one. Scotland has its own rule on gratuitous alienations, which reaches back five years before sequestration where the gift went to an associate, such as a relative.

### Why concessionary purchases fail

A concessionary purchase can fail on the valuation, on a seller who expects the discount back or plans to stay on with a lender that will not allow it, on incomplete gift paperwork, or on a lender whose criteria do not fit the sale. Each can be checked before an application is made, so the lender is chosen before the price is fixed.

## The tax on a below-value sale

**A discounted family sale is taxed differently on each side: the buyer's purchase tax follows the price, and the seller's capital gains tax and Inheritance Tax follow the full value.** The rules below are the published ones as at October 2026. Capital gains tax and Inheritance Tax apply across the UK, while the purchase tax depends on where the home is. Mortgage Lane does not give tax advice, so the buyer and the seller each take advice from a tax adviser before the price is agreed, and HMRC's guidance on gov.uk sets out the detail.

### Stamp Duty Land Tax and the devolved taxes

HMRC charges Stamp Duty Land Tax on the amount paid for a property, the chargeable consideration ([gov.uk: SDLT when transferring ownership](https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property)). Between individuals that is the price actually paid, so a family discount lowers the buyer's tax as well as the loan. First-time buyers' relief in England and Northern Ireland is tested on that price: 0% on the first £300,000 and 5% on the part from £300,001 to £500,000, available only where the price is £500,000 or less. A buyer who will own more than one home usually pays 5% on top of the standard rates ([gov.uk: SDLT residential rates](https://www.gov.uk/stamp-duty-land-tax/residential-property-rates)). The market value rule in SDLT applies to a transfer to a company connected with the seller, not to a sale between relatives. If the buyer takes over part of an existing mortgage, as on the purchase of a family member's share, the debt taken on counts towards the consideration.

Wales charges Land Transaction Tax on the price, with nothing to pay on the first £225,000 at the main residential rates ([Welsh Government: LTT rates and bands](https://www.gov.wales/land-transaction-tax-rates-and-bands)). Scotland charges LBTT on the price, and its first-time buyer relief raises the nil rate band to £175,000 ([Revenue Scotland: residential LBTT](https://revenue.scot/taxes/land-buildings-transaction-tax/residential-property)). How the purchase is documented can change the figure, so the conveyancer confirms the consideration before completion.

### Capital gains tax

For capital gains tax, a sale to a [connected person](https://mortgagelane.com/definitions#def-connected-person) is treated as made otherwise than at arm's length, so the seller's gain is worked out on the market value instead of the price ([Taxation of Chargeable Gains Act 1992, section 18](https://www.legislation.gov.uk/ukpga/1992/12/section/18)). Connected persons include a spouse or civil partner, parents, grandparents, children, grandchildren, brothers and sisters and their spouses, and the same relatives of a spouse. Aunts, uncles, nieces and nephews are not connected for this tax, but HMRC also uses market value for any asset sold for less than it was worth to help the buyer, so a discount to a niece is measured the same way ([gov.uk: CGT market value](https://www.gov.uk/capital-gains-tax/market-value)). A sale to a spouse or civil partner who lives with the seller is treated as giving neither a gain nor a loss, so the buyer takes over the seller's original cost. After a separation it lasts until the end of the third tax year after the year they stopped living together, or until a court grants the divorce or separation if that is sooner. It also covers a transfer under a divorce agreement or court order ([Taxation of Chargeable Gains Act 1992, section 58](https://www.legislation.gov.uk/ukpga/1992/12/section/58)).

Private Residence Relief usually means no tax on the sale of the seller's only home. The conditions are that they have lived in it as their main home throughout, have not let it out or used part of it only for business, and the grounds are under 5,000 square metres ([gov.uk: tax when you sell your home](https://www.gov.uk/tax-sell-home)). A buy to let, a second home or a former home that has been let is different: the part of the gain that Private Residence Relief does not cover is worked out on the full market value, although the seller received less.

### Inheritance Tax and gifts with reservation

For Inheritance Tax, HMRC counts money lost by selling something for less than it is worth as a gift, so the discount is a gift from the seller to the buyer. It is normally a [potentially exempt transfer](https://mortgagelane.com/definitions#def-potentially-exempt-transfer). No tax is due on it if the seller lives for 7 years after the sale, and the £3,000 annual exemption can reduce it. If the seller dies within 7 years, taper relief can reduce the tax on gifts made 3 to 7 years before the death where the gifts are worth more than the £325,000 threshold ([gov.uk: Inheritance Tax on gifts](https://www.gov.uk/inheritance-tax/gifts)).

If the seller carries on living in the home, the gifted part can be a [gift with reservation](https://mortgagelane.com/definitions#def-gift-with-reservation). HMRC treats the undervalue as the property given, so on a home worth £400,000 sold for £320,000 with the seller staying on, 20% of the home's value at their death can be counted in their estate ([HMRC: IHTM14316](https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14316)). Occupation paid for at full value, such as a full market rent agreed on commercial terms, is not treated as a reservation.

### The employer's discount

HMRC treats an asset that an employer gives or sells to an employee as a benefit of the job. The employer reports it on form P11D, and tax and Class 1A National Insurance are due on the value of the benefit ([gov.uk: assets bought, sold or given to employees](https://www.gov.uk/expenses-and-benefits-assets-bought-sold-or-given/what-to-report-and-pay)). The employee checks the tax with the employer or a tax adviser before agreeing the price.

Where an owner sells their £400,000 home for £320,000 and stays on, 20% of the home's value at their death can be counted in their estate as a gift with reservation, unless they pay a full market rent.

## How a concessionary purchase mortgage is arranged

1. **The structure and the advice.** Who is selling and the relationship, why the price is reduced, whether the seller will move out, and tax advice for both sides before the price is agreed, with an independent valuation as a guide.
2. **Lender match.** The lenders that accept that seller and that size of discount, the basis each uses, its maximum loan to value and any cash it asks from the buyer, with the income checked against the loan, usually as a multiple of income after commitments.
3. **Agreement in principle.** An [agreement in principle](https://mortgagelane.com/definitions#def-agreement-in-principle) on the buyer's income, with the concessionary nature of the sale and the expected value declared.
4. **Application and valuation.** The full application at the agreed price, the lender's valuation, and the loan and any deposit worked out again if the valuation differs from the figure expected.
5. **The gift and the legal work.** The seller's gift letter or the solicitor's confirmation, any occupier's consent, solvency declaration or indemnity insurance, and separate solicitors where the lender requires them, with the conveyancers reporting the price and the discount to the lender.
6. **Offer and completion.** The mortgage offer and completion, with no cash deposit changing hands where the gifted equity covers it, and the purchase tax return made on the consideration given.

## Gifted equity on a family sale: the arithmetic

**A family discount can help the buyer twice, once as the deposit and once on stamp duty, while what it costs the family depends on what the seller is selling and whether they move out.**

### Step 1. The buyer

An illustrative case, not a product or an offer: parents sell a home they own, valued by the lender at £400,000, to their daughter, a first-time buyer, for £320,000. She earns £64,000 a year and has no other credit commitments, so at 5 times income, the standard multiple in Mortgage Lane's experience, her income supports £320,000. The table compares a lender on each basis, both with a 90% maximum, and a full price sale funded by a [gifted deposit](https://mortgagelane.com/definitions#def-gifted-deposit) of £80,000 in cash. Stamp Duty Land Tax is worked at the first-time buyer rates for England and Northern Ireland.

## Step 1 figures: a £400,000 home sold to a daughter for £320,000

*Concessionary purchase mortgages: Step 1 figures, a £400,000 home sold to a daughter for £320,000*

| Route | Price | Cash from the buyer or a gift | Loan | Loan to value as the lender works it out | Stamp Duty Land Tax (first-time buyer) |
| --- | --- | --- | --- | --- | --- |
| Concessionary sale, lender using the valuation | £320,000 | £0 | £320,000 | 80% of the valuation | £1,000 |
| Concessionary sale, lender using the price paid | £320,000 | £32,000 | £288,000 | 90% of the price | £1,000 |
| Full price sale with an £80,000 cash gift | £400,000 | £80,000 gifted deposit | £320,000 | 80% of the valuation | £5,000 |

Illustrative arithmetic on hypothetical figures; the first two rows are worked with the calculator on this page. Both lenders are assumed to have a 90% maximum loan to value. Stamp Duty Land Tax at the first-time buyer rates on gov.uk, checked 8 October 2026. Not tax advice and not an offer of finance.

The loan and the loan to value are the same in the first and third rows, and the concessionary route saves the daughter £4,000 of stamp duty because the tax is charged on the £320,000 she pays. At the standard rates, for a buyer who does not qualify as a first-time buyer, the tax would be £6,000 on £320,000 and £10,000 on £400,000, the same £4,000 difference. With the lender on the price basis, the same family discount still leaves her needing £32,000, so the choice of lender matters as much as the size of the discount. Over 30 years at 5.2%, the illustrative rate used across our guides and not a product rate, the £320,000 loan costs £1,757.15 a month.

### Step 2. The seller

The table assumes that, where the home is a buy to let, the parents bought it for £250,000. Costs, reliefs other than Private Residence Relief, the annual exempt amount and Inheritance Tax exemptions are left out.

## Step 2 figures: the parents' tax position

*Concessionary purchase mortgages: Step 2 figures, the parents' tax position*

| What the parents sell | Capital gains tax | Inheritance Tax |
| --- | --- | --- |
| Their own home, lived in as their main home throughout, and they move out | Usually none, under Private Residence Relief | £80,000 gift, a potentially exempt transfer |
| A buy to let they bought for £250,000 | Gain worked out on the £400,000 market value: £150,000, against £70,000 on the price paid | £80,000 gift, a potentially exempt transfer |
| Their own home, and they stay on without paying rent | Usually none, under Private Residence Relief | The gifted 20% of the home can be a gift with reservation and counted in their estate |

Illustrative, on the rules published on gov.uk and in HMRC's manuals and the Taxation of Chargeable Gains Act 1992, checked 8 October 2026. Gains are before costs, reliefs and the annual exempt amount; Inheritance Tax figures are before exemptions. Not tax advice.

On a buy to let the discount does not reduce the parents' capital gains tax, because a sale to their daughter is treated as made at market value. The family's saving there is the daughter's stamp duty and a purchase with no cash moving. On their own home the capital gains point usually falls away, and the Inheritance Tax position turns on whether they move out. If they leave, the £80,000 gift starts the 7-year clock, while staying on without paying a full market rent can keep the gifted part of the home in their estate.

### Step 3. A lower valuation

If the lender's valuer puts the home at £380,000 instead of £400,000, the gifted equity falls to £60,000 and the loan to value on a £320,000 loan rises to 84.2%. A lender with a 90% maximum still lends the full price, but a lender with an 80% maximum would lend £304,000 and the daughter would need £16,000 of her own. A lender that asks for 5% of the price from the buyer's own money would also lend £304,000, even on the original £400,000 valuation, leaving the same £16,000 to find.

### What decides the case

Two figures decide the buyer's side: the lender's valuation, which sets the gifted equity, and the lender's basis, which decides whether that equity replaces the deposit. The seller's side turns on what is being sold and whether they will move out, so the price should be agreed after an independent valuation and tax advice for both sides, with a lender chosen for how it treats that type of sale. Our pages on [family help mortgages](https://mortgagelane.com/mortgages/family-help-mortgages) and [JBSP mortgages](https://mortgagelane.com/mortgages/jbsp-mortgages) cover the other ways a family can help, and the [first-time buyer mortgage guide](https://mortgagelane.com/guides/first-time-buyer-mortgage-guide) covers deposits and schemes.

## Related topics

- [2026](https://mortgagelane.com/mortgages/bmv-mortgages)Mortgage[BMV Mortgages, Buying Below Market Value](https://mortgagelane.com/mortgages/bmv-mortgages)How lenders treat a genuine below market value purchase: family and landlord sales, Right to Buy, valuation and legal checks, bridging exits and remortgaging.[Read more about BMV Mortgages, Buying Below Market Value](https://mortgagelane.com/mortgages/bmv-mortgages)
- [2026](https://mortgagelane.com/guides/first-time-buyer-mortgage-guide)Guide[The Complete First-Time Buyer Mortgage Guide](https://mortgagelane.com/guides/first-time-buyer-mortgage-guide)The complete first-time buyer guide: deposits, 95% and 100% mortgages, JBSP and gifted deposits, concessionary purchases, Shared Ownership, First Homes, Right to Buy and every devolved scheme.[Read more about The Complete First-Time Buyer Mortgage Guide](https://mortgagelane.com/guides/first-time-buyer-mortgage-guide)
- [2026](https://mortgagelane.com/mortgages/jbsp-mortgages)Mortgage[JBSP Mortgages, Joint Borrower Sole Proprietor](https://mortgagelane.com/mortgages/jbsp-mortgages)JBSP mortgages explained: family income on the loan, not the title. How affordability, term and stamp duty work, which lenders offer it, and the exit.[Read more about JBSP Mortgages, Joint Borrower Sole Proprietor](https://mortgagelane.com/mortgages/jbsp-mortgages)

## Concessionary purchase calculator

The calculator compares the cash deposit needed with a lender that measures the loan against its valuation and with one that works on the price you pay, and shows the gifted equity, the loan to value and the most your income supports. The starting figures are the family sale on this page: a home valued at £400,000 sold for £320,000, a 90% maximum and an income of £64,000. Enter the lender's valuation, the agreed price and your own income and commitments, and move the valuation to see what a lower figure does to the gifted equity.

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Indicative estimate only, subject to lender criteria, affordability and valuation. Lenders differ on whether they measure the loan against their valuation or the price, on the sellers and the size of discount they accept and on any cash they ask from the buyer, and the figures leave out the seller's tax and the buyer's purchase costs. This is not a mortgage offer. Your home may be repossessed if you do not keep up repayments on your mortgage.

## Frequently asked questions about concessionary purchase mortgages

**Q: What is a concessionary purchase mortgage?**

faq-id: what-is-a-concessionary-purchase-mortgage

A concessionary purchase mortgage finances a property bought below market value from someone with a connection to the buyer, usually a family member and sometimes a landlord selling to a sitting tenant. Some lenders treat the discount as a gift of equity that can count towards the deposit, while others lend only on the price paid and ask for a cash deposit. Lenders that accept it want the discount to be an unconditional gift, confirmed in writing and checked by the solicitors, and some also require the seller to move out.

**Q: What loan to value can I get on a concessionary purchase?**

faq-id: what-loan-to-value-can-i-get-on-a-concessionary-purchase

It depends on the discount and on how the lender measures the loan. A lender that works on its valuation divides the loan by the valuation, so a 15% discount with the loan covering the whole price gives an 85% loan to value and no cash deposit, as long as 85% is within its maximum. A lender that works on the price paid applies its maximum to the price instead, so you need a cash deposit whatever the discount. Each lender sets its own maximum: one lender's published criteria, checked on 8 October 2026, allow up to 90% of the open market value, with the loan capped at the discounted price.

**Q: What happens if the valuation is lower than the claimed market value?**

faq-id: what-happens-if-the-valuation-is-lower-than-the-claimed-market-value

The lender works from its own valuer's figure, not the value the seller or an agent suggested. If the valuation is lower, the discount the lender recognises is smaller, so the loan-to-value is higher and you may need more of your own money or a smaller loan. If the discount falls below a lender's minimum, the purchase may no longer qualify as a concessionary purchase with that lender.

**Q: Can the seller stay in the property after a concessionary purchase?**

faq-id: can-the-seller-stay-in-the-property-after-a-concessionary-purchase

It depends on the lender. Some lenders' published criteria say the seller cannot live in the property after the sale, or ask for vacant possession on completion. Others allow the seller to stay if they sign the lender's occupier consent form, which puts any right to live there behind the mortgage, and decline where the seller is given a lifetime tenancy. Staying on can have tax effects too: if the seller lives there without paying a full market rent, HMRC can treat the gifted part of the home as a gift with reservation for Inheritance Tax. Raise it before the price is agreed, because it narrows the choice of lenders.

**Q: Who can sell me a property at a discount for a concessionary mortgage?**

faq-id: who-can-sell-me-a-property-at-a-discount-for-a-concessionary-mortgage

It varies by lender. Family sales are the most widely accepted, but which relatives count differs: some lenders include aunts, uncles, nieces, nephews and first cousins, others only immediate family. Some lenders also accept a landlord selling to a sitting tenant, and a few accept an employer selling to an employee, a former partner or a friend. Other lenders accept family sales only.

**Q: Can I buy my rented home from my landlord at a discount?**

faq-id: can-i-buy-my-rented-home-from-my-landlord-at-a-discount

Possibly, with a lender that accepts a landlord to sitting tenant sale. Those lenders may work out the loan-to-value on the valuation and treat the discount as your deposit, often with conditions such as a minimum tenancy (at least one year at one lender) and a minimum discount before no cash deposit is needed. Other lenders accept family sales only, or lend on the price you pay. Buying a council home under Right to Buy is a separate scheme with its own rules.

**Q: Why would a landlord sell to a tenant below market value?**

faq-id: why-would-a-landlord-sell-to-a-tenant-below-market-value

Selling to the tenant who already lives there saves the landlord some of the costs of an open market sale, such as estate agent's fees, rent lost while the home stands empty and the time it takes to get vacant possession. A buyer is already in place, so the sale can also be quicker and more certain. A let home can be worth less to an investor with a tenant in it, and a landlord may price the sale against that figure. The buyer's lender values the home on its own instructions, and the discount it recognises is measured against its valuer's figure.

**Q: Can I use my Right to Buy discount as a deposit?**

faq-id: can-i-use-my-right-to-buy-discount-as-a-deposit

In England, lenders that accept Right to Buy usually let the discount count towards the deposit, because it is equity in the property from completion. Each lender still caps the loan against the market value, and the caps vary between lenders, so a small discount can leave you needing cash of your own. For applications made on or after 21 November 2024 the maximum discount is the lower of 70% of the value and a regional maximum of £16,000 to £38,000, and some or all of the discount is repayable if you sell within five years, worked out on the value of the home when you sell. Right to Buy has ended in Wales and Scotland.

**Q: How much is the Right to Buy discount?**

faq-id: how-much-is-the-right-to-buy-discount

In England the discount is a percentage of the value that rises with your years as a public sector tenant, capped at a regional cash maximum. After 3 to 5 years it is 35% for a house and 50% for a flat, rising by 1% a year for a house and 2% a year for a flat after 5 years, up to 70% of the value. For applications made from 21 November 2024 the discount is also capped at between £16,000 and £38,000 depending on the area, and it is reduced if the landlord has spent money on the home in the last 30 years ([gov.uk: Right to Buy discounts](https://www.gov.uk/right-to-buy-buying-your-council-home/discounts)). Proposed changes in the Social Housing Bill were not law as at October 2026.

**Q: Is Right to Buy available in Scotland and Wales?**

faq-id: is-right-to-buy-available-in-scotland-and-wales

No. Right to Buy ended for council and housing association tenants in Scotland on 31 July 2016 ([gov.scot: council housing](https://www.gov.scot/policies/social-housing/council-housing/)) and in Wales on 26 January 2019, when the related schemes for housing association tenants ended too ([Welsh Government: Right to Buy to end in Wales](https://www.gov.wales/right-buy-end-wales-month)). Tenants there cannot buy their home at a statutory discount. Right to Buy still runs in England. In Northern Ireland, Housing Executive tenants have their own House Sales Scheme, with a discount of 20% of the market value after five years as a secure tenant, rising to 60% or £24,000, whichever is lower.

**Q: Is Right to Buy changing?**

faq-id: is-right-to-buy-changing

Changes are proposed for England but are not yet law. On 28 April 2026 the government announced plans to raise the qualifying period from three years to ten, and to start discounts at 5% of the value, rising by 1% a year to a maximum of 15% or the regional cash cap, whichever is lower. The Social Housing Bill, which includes the longer qualifying period and the lower discounts, passed the House of Lords and had its second reading in the House of Commons on 10 September 2026. Until it is passed and in force the current rules apply, so check them with your landlord or on GOV.UK when you apply. Right to Buy has already ended in Wales and Scotland.

**Q: Can I buy a property from my employer at a discount?**

faq-id: can-i-buy-a-property-from-my-employer-at-a-discount

Yes, with a lender that accepts a sale from an employer to an employee, although fewer lenders accept it than accept family sales. A lender that does treats the discount like other gifted equity, measuring the loan against its valuation and capping it at the price, as long as the discount is an unconditional gift that the employer cannot claw back. The discount comes to you because of your job, so it can be a taxable benefit: an employer that gives or sells an asset to an employee reports it to HMRC, and tax and National Insurance are due on the value of the benefit ([gov.uk: assets given to employees](https://www.gov.uk/expenses-and-benefits-assets-bought-sold-or-given/what-to-report-and-pay)). Check the tax with your employer or a tax adviser first.

**Q: Do I pay stamp duty on the market value or the price?**

faq-id: do-i-pay-stamp-duty-on-the-market-value-or-the-price

On a sale between individuals, Stamp Duty Land Tax in England and Northern Ireland is charged on the price you pay, so a family discount also lowers the tax. HMRC charges it on the amount paid, the chargeable consideration, and first-time buyers' relief, as at October 2026, is tested on that price: 0% up to £300,000 and 5% from £300,001 to £500,000, where the price is £500,000 or less ([gov.uk: SDLT rates](https://www.gov.uk/stamp-duty-land-tax/residential-property-rates)). The SDLT market value rule applies to transfers to a connected company. If you take over part of the seller's mortgage, that debt counts towards the price. Wales and Scotland charge their own taxes on the price, with their own rates.

**Q: Does the seller pay capital gains tax on a below-value sale?**

faq-id: does-the-seller-pay-capital-gains-tax-on-a-below-value-sale

The seller can pay capital gains tax as if they had sold at full market value. Market value replaces the price where an asset is sold to a connected person, such as a child, grandchild, parent or sibling ([Taxation of Chargeable Gains Act 1992, section 18](https://www.legislation.gov.uk/ukpga/1992/12/section/18)), or sold for less than it is worth to help the buyer ([gov.uk: CGT market value](https://www.gov.uk/capital-gains-tax/market-value)). Private Residence Relief usually means no tax on the seller's only home if it has been their main home throughout. On a buy to let or second home, the gain is worked out on the market value. A sale to a spouse or civil partner who lives with the seller gives neither a gain nor a loss. Take tax advice before agreeing the price.

**Q: Is gifted equity subject to inheritance tax?**

faq-id: is-gifted-equity-subject-to-inheritance-tax

Gifted equity is a gift for Inheritance Tax, because HMRC counts money lost by selling something for less than it is worth as a gift. No tax is due on it if the seller lives for 7 years after the sale, and exemptions such as the £3,000 annual exemption can reduce it. If the seller dies within 7 years, taper relief can reduce the tax on gifts made 3 to 7 years before the death where the gifts are worth more than the £325,000 threshold, as at October 2026 ([gov.uk: Inheritance Tax on gifts](https://www.gov.uk/inheritance-tax/gifts)). If the seller goes on living in the home without paying a full market rent, HMRC can treat the gifted part as a gift with reservation, which stays in their estate.

**Q: Do the buyer and seller need separate solicitors?**

faq-id: do-the-buyer-and-seller-need-separate-solicitors

Some lenders require separate solicitors or conveyancers for the buyer and the seller on a concessionary purchase, and others leave it to the parties. Separate advice protects each side, because their interests differ on the price, the gift and any plan for the seller to stay on. The conveyancer acting for the lender reports the price, the discount and how the rest of the money is being provided, under the UK Finance Mortgage Lenders' Handbook. Where a lender is concerned about the seller's solvency, it may also ask for a solvency declaration or insolvency indemnity insurance, which the seller's solicitor deals with.

**Q: What is the difference between gifted equity and a gifted deposit?**

faq-id: what-is-the-difference-between-gifted-equity-and-a-gifted-deposit

Gifted equity is a discount on the price given by the seller, so no money changes hands for the deposit, while a gifted deposit is cash given by someone else, usually family, towards a purchase at the full price. Lenders treat both as gifts that must not be repaid, and each needs written confirmation from the giver. Gifted equity also lowers the price, so the buyer's stamp duty can be lower than on a full price purchase funded by a cash gift of the same amount. For the giver, both can be gifts for Inheritance Tax, and a seller who gives gifted equity can also face capital gains tax on the full market value. Both sides should take advice from a tax adviser before the price is agreed.

**Q: Why do lenders ask for a solvency declaration on gifted equity?**

faq-id: why-do-lenders-ask-for-a-solvency-declaration-on-gifted-equity

Because a gift of equity can be challenged if the seller later becomes bankrupt. In England and Wales a trustee in bankruptcy can apply to set aside a transaction at an undervalue made in the five years before the bankruptcy petition or application. Within two years no proof of insolvency is needed. For years two to five the trustee must show the seller was insolvent at the time or became so because of the sale, which is presumed for a sale to a relative unless shown otherwise. A declaration of solvency made at the sale is evidence against that presumption, so some lenders ask for one, insolvency indemnity insurance or both. Scotland has its own rules on gratuitous alienations.

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Published: 2026-10-08

Last reviewed: 2026-10-08

Source: https://mortgagelane.com/mortgages/concessionary-purchase-mortgages