How Credit Issues Affect Concessionary Purchases: Full Guide

Concessionary purchases—where a property is sold below market value, often by a family member or landlord—can make buying more accessible, especially for those with limited deposits. However, many applicants considering these arrangements also worry about the impact of a less-than-perfect credit history. Understanding how credit issues affect concessionary purchases can help you prepare properly and know what lenders look for.

This guide explains how lenders assess concessionary purchases, how credit factors influence mortgage decisions, and what buyers can do to strengthen their applications. This article provides general information only and does not offer regulated mortgage advice.

---

What Is a Concessionary Purchase?

A concessionary purchase occurs when someone buys a property at a price below market value (BMV), often from:

• Parents or close relatives
• A landlord selling to a long-term tenant
• Employers offering discounted schemes
• Sellers seeking a fast, secure sale

The discount—sometimes called gifted equity—may be used as the mortgage deposit, depending on the lender’s policy.

---

How Lenders Assess Concessionary Purchases

Even though the buyer benefits from a discount, lenders still follow standard lending rules. They will assess:

1. The relationship between buyer and seller

Many lenders prefer concessionary purchases involving:

• Family members
• Landlords selling to tenants
• Employer-related schemes

Discounts from unrelated private sellers may receive greater scrutiny.

2. Property valuation

A lender’s valuer confirms:

• True market value
• Whether the discount is genuine
• Whether the agreed purchase price is realistic

If the valuation differs significantly, the loan amount may be adjusted.

3. Affordability and income stability

Discounts do not bypass affordability checks. Lenders still evaluate:

• Employment income
• Outgoings
• Financial commitments
• Long-term repayment sustainability

4. Deposit source

Many lenders accept the concession as a deposit, but some require the buyer to contribute additional savings—even in a discounted sale.

---

How Credit Issues Influence Concessionary Purchase Mortgages

A concessionary discount does not eliminate the impact of adverse credit. Lenders still look closely at your financial behaviour when deciding whether to approve the mortgage.

Here are the key ways credit issues affect concessionary purchases:

---

1. Adverse Credit May Reduce the Lenders Available

Some lenders who normally accept concessionary purchases restrict applications where there is:

• Recent default activity
• Unsettled CCJs
• Multiple missed payments
• High credit utilisation
• Debt management plans

This doesn’t mean a mortgage is impossible—it simply narrows the pool of lenders.

---

2. The Discount May Not Offset Poor Credit

While the discount can act as a deposit, lenders still assess:

• Your credit score
• Your repayment reliability
• Your overall debt position

A large discount may improve the loan-to-value (LTV), but it does not automatically guarantee approval if the credit profile is weak.

---

3. Recent Credit Issues Carry More Weight

Lenders are especially cautious about:

• Defaults registered in the last 12–24 months
• Recent missed payments
• Short-term financial stress

Even with a concessionary purchase, recent adverse entries can be a barrier unless the lender specialises in flexible criteria.

---

4. Settled Credit Issues Are Usually Viewed More Favourably

Lenders often look more favourably at:

• Settled defaults
• Cleared CCJs
• Closed debt management plans
• Resolved arrears

The combination of a settled account and a concessionary discount may help strengthen a case.

---

5. Specialist Lenders May Offer More Flexibility

Specialist lenders often:

• Accept a wider range of credit profiles
• Allow gifted equity from family members or landlords
• Use manual underwriting to assess affordability
• Consider the stability shown in recent bank statements

These lenders may be an option when high-street banks decline due to adverse credit.

---

6. A Strong Discount Can Improve Loan-to-Value (LTV)

A lower LTV can make an application more attractive—even with imperfect credit.

Example:

• Market value: £300,000
• Purchase price: £240,000
• Equity gifted: £60,000

Even if borrowing the full £240,000, the effective LTV is 80%.
Some lenders may accept higher-risk applicants at lower LTVs.

---

7. Bank Statement Conduct Is Still Critical

Regardless of the discount, lenders examine recent bank statements to assess:

• Regular bill payments
• Spending patterns
• Overdraft usage
• Gambling behaviour
• Unexpected transactions

Strong bank conduct can help mitigate concerns from older credit issues.

---

Types of Credit Issues and Their Impact on Concessionary Purchases

1. Missed Payments

Older or isolated missed payments are often acceptable. Recent missed payments carry more risk.

2. Defaults

Lenders consider:

• Age of default
• Value of default
• Whether it is settled

Defaults over 2–3 years old may be less significant.

3. CCJs

Many lenders decline recent or unsatisfied CCJs, but specialist lenders may still consider cases, particularly at lower LTVs.

4. IVA, DRO, or Bankruptcy

These limit lender choice significantly. A concessionary purchase may still be possible after discharge, depending on the time elapsed and credit rebuild.

5. Payday Loan Use

Recent payday loans can be a concern, though older use may be accepted.

---

Can the Discount Help Overcome Credit Issues?

In some situations, yes. A strong discount can help by:

• Lowering the LTV
• Reducing overall borrowing
• Strengthening the equity position
• Making lenders more comfortable with the risk profile

However, the discount does not override affordability checks or disregard adverse credit.
It is considered alongside your overall financial situation.

---

Example Scenarios

Scenario 1: Tenant with Old Defaults Buying from Landlord

• Defaults over three years old
• Stable income
• 20% concessionary discount
  → Some lenders may accept using the discount as full deposit.

---

Scenario 2: Buyer with Recent Missed Payments Buying from Family

• Missed payments within the last six months
• 15% discount on property
  → Fewer lenders available; specialist lender more likely to consider.

---

Scenario 3: Buyer With CCJ Buying From Parent

• CCJ settled last year
• 25% discount
  → Specialist lenders may accept due to low LTV and stability shown in recent statements.

---

How to Strengthen Your Application if You Have Credit Issues

Although this guide does not provide regulated advice, applicants commonly prepare by focusing on:

1. Checking credit files across all three agencies

Ensure no errors or outdated information remain.

2. Keeping bank statements clean

Avoid unarranged overdrafts or irregular spending.

3. Settling smaller debts where possible

Resolved credit issues appear more favourable.

4. Reducing credit utilisation

Lower balances demonstrate financial control.

5. Preparing documentation early

Lenders want clear evidence of income and deposit structure.

6. Ensuring the seller signs gifted equity declarations

These confirm the discount is genuine and unconditional.

---

Summary

Understanding how credit issues affect concessionary purchases helps buyers prepare for a more informed and smoother mortgage application. While adverse credit may limit lender options, a concessionary discount—especially from family or a landlord—can help strengthen overall affordability and reduce the loan-to-value ratio. Lenders still prioritise financial stability, recent conduct, and clear documentation, but many buyers with imperfect credit successfully secure concessionary purchase mortgages each year.

This guide provides general information only. For personalised recommendations, regulated mortgage advice is required.