How Credit Issues Affect Concessionary Purchases: Full Guide

If you’re exploring a discounted home purchase from a family member or landlord, you may be wondering how credit issues affect concessionary purchases. The reality is that bad credit doesn’t automatically stop you from buying the property at a discount — in fact, concessionary purchases often help borrowers with imperfect credit, because the discount creates instant equity and lowers the lender’s risk.

However, lenders still apply specific criteria, and the type, age and severity of your credit issues can influence how the mortgage is assessed.

This guide explains how lenders view adverse credit, what documentation they require, what impact the gifted equity makes, and how to maximise your chances of approval.

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Why Lenders Treat Concessionary Purchases Differently

A concessionary purchase involves buying a property below its market value, and the discount becomes your deposit through gifted equity.

This reduces risk for lenders because:

• You immediately own equity in the property
• The loan-to-value (LTV) is lower
• There is less chance of the lender being exposed to negative equity
• The seller is usually trusted (family or landlord)

These built-in advantages often make lenders more open to credit blips.

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How Credit Issues Affect Concessionary Purchases

Here’s how different types of credit problems impact your mortgage when buying at a discount.

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Missed Payments

Missed payments are one of the most common issues lenders see.

How lenders view missed payments:

• Older than 12 months: often acceptable
• Within the last 6 months: more restrictive
• On unsecured credit: usually easier to accept
• On essential bills (rent, utilities): more serious

How the discount helps:

Gifted equity strengthens the application by lowering the effective LTV. A lender that might normally require a cash deposit may accept a gifted-equity deposit instead.

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Defaults

Defaults vary in severity depending on age and size.

What lenders look at:

• Are the defaults satisfied?
• How old are they?
• Are they small (e.g., mobile bills) or large (e.g., loans)?

Impact on concessionary purchases:

Gifted equity can offset recent defaults because the lender’s exposure is reduced. Some specialist lenders accept defaults even if they occurred in the last 12–24 months.

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CCJs (County Court Judgments)

CCJs are more serious, but not a deal-breaker.

Lender considerations:

• Size of the CCJ
• Age of the CCJ
• Whether settled or outstanding
• How many CCJs are present

How gifted equity helps:

A strong discount may keep the LTV low enough to gain approval where a traditional 5% or 10% deposit would fall short.

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Debt Management Plans (DMPs)

Being in a DMP can restrict lender choice, but still workable.

Key points:

• Some lenders accept active DMPs
• Many prefer the plan to be at least 12 months old
• Bank statements must show stable payments

How discount affects approval:

The lower LTV can significantly improve affordability and reduce lender risk, making an adverse-credit concessionary purchase more viable.

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Mortgage Arrears

Mortgage arrears are treated seriously.

Lender view:

• Arrears in the last 12 months: very restrictive
• Older arrears: may be acceptable

Good news for landlord purchases:

If you have arrears with your current landlord, lenders will want to see evidence of rent being paid on time since then. Strong recent rental conduct carries weight.

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Payday Loans

Payday loans raise concern because they indicate financial instability.

Impact:

• Payday loans within 12 months may restrict mainstream lenders
• Some specialist lenders will still consider the application

How gifted equity helps:

The discount gives the lender confidence by lowering the LTV position.

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Thin Credit Files

A lack of credit history can cause just as much difficulty as bad credit.

How to strengthen the case:

• Bank statements showing stable income
• Proof of rent paid on time
• Gifted equity improving LTV

Many lenders consider rental payment history as a positive compensating factor.

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Why Concessionary Purchases Can Be Easier With Bad Credit

A discounted purchase often works in favour of borrowers with adverse credit because:

• LTV is calculated on market value, not the discounted price
• No cash deposit is needed if gifted equity is sufficient
• The lender sees reduced risk due to built-in equity
• The transaction is seen as trustworthy and non-market exposed

These factors can open doors that traditional mortgage routes may not.

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Documents You’ll Need When You Have Credit Issues

To strengthen the application, lenders may request:

• 3–6 months bank statements
• Evidence of stable income
• Explanations for credit issues
• DMP or settlement letters
• Tenant rent history (landlord discount purchases)
• Proof the gifted equity is non-repayable
• Full valuation confirming market value

Being prepared helps reduce delays.

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Tips to Improve Your Chances of Approval

• Check your credit files with all major agencies
• Avoid new credit applications
• Keep bank accounts stable
• Provide a clear explanation if credit issues were temporary
• Make sure the gifted equity letter is properly formatted
• Choose a lender that specialises in credit-impaired borrowing

An adviser can guide you to lenders most suitable for your profile.

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Final Thoughts

Understanding how credit issues affect concessionary purchases can help you plan ahead and choose the right lender. While adverse credit can restrict options, a concessionary purchase offers a powerful advantage: the discount instantly creates equity, reducing lender risk and improving your chances of approval.

Whether the discount is from a family member or landlord, many lenders will consider applications with credit blips — especially when the equity position is strong.

If you’d like to explore your options or understand which lenders will accept your circumstances, we’re here to support you every step of the way.