What Is a Concessionary Purchase From a Family Member? A Simple, Clear Guide

Buying a property from a family member can offer practical and financial advantages, particularly when the property is sold at below market value. This type of transaction is known as a concessionary purchase, and it often makes buying more accessible for relatives who may not have a full deposit saved. Understanding how a concessionary purchase from a family member works—along with lender requirements, legal steps, and the benefits and considerations—helps buyers prepare for the process.

This article explains the essentials in a clear, straightforward way. It provides general information only and does not offer regulated mortgage advice.

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What Is a Concessionary Purchase From a Family Member?

A concessionary purchase from a family member happens when a relative sells a property to another relative for less than its market value. The reduction in price is treated as a discount or gifted equity, which may act as the buyer’s deposit if accepted by the lender.

Example

• Market value: £300,000
• Sale price: £240,000
• Discount: £60,000

This £60,000 becomes gifted equity.

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Why Family Members Choose Concessionary Purchases

Families may decide to offer a concessionary purchase for many reasons, including:

• Helping a relative move into their first or next home
• Passing on property without gifting it completely
• Avoiding estate agent fees
• Selling quickly and simply
• Providing financial support without cash transfer
• Estate planning or inheritance considerations

These motivations do not change the legal or mortgage process, but they explain why concessionary purchases are common in family settings.

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How the Discount Works

The key feature of a concessionary purchase is the discounted price.

The Difference Becomes Gifted Equity

The discount is treated as a financial gift built into the transaction.
Unlike a cash deposit:

• No money changes hands
• The equity comes from the reduced sale price
• It exists instantly at the point of purchase

Lenders then factor this into their loan-to-value (LTV) calculations.

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How Loan-to-Value (LTV) Works in a Family Concessionary Purchase

Lenders typically base LTV on the property’s market value, not the discounted sale price.

Example

• Market value: £300,000
• Mortgage borrowing: £240,000
• Borrowing as % of market value = 80% LTV

This can support stronger mortgage options than if LTV were calculated using the discounted price.

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Can the Discount Count as the Deposit?

Yes — in many cases, the discount acts as the deposit.

If the gifted equity meets or exceeds the lender’s deposit requirement, the buyer may not need to provide any cash deposit.

Example

• Required deposit: 10% (£30,000)
• Gifted equity: £60,000 (20%)

Deposit requirement is fully met by the discount.

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When a Cash Deposit Is Still Needed

A buyer may still need to contribute a deposit if:

• The discount is smaller than the lender’s minimum deposit requirement
• The valuation comes in lower than expected
• The buyer has recent adverse credit
• The lender does not accept gifted equity alone

Example

• Discount: 5%
• Lender deposit requirement: 10%

Buyer must provide the additional 5%.

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What Lenders Check in a Family Concessionary Purchase

Lenders apply additional checks to ensure the discounted sale is genuine and financially sound.

Key checks include:

1. Independent Property Valuation

Confirms:

• Market value
• Property condition
• Size of discount

2. Gifted Equity Letter

The seller must confirm:

• The discount is an unconditional gift
• No repayment is expected
• They will not retain any interest in the property

3. Proof of Relationship

Some lenders request evidence of the family connection.

4. Affordability Checks

Even with large gifted equity, affordability must meet lender requirements.

5. Credit Assessment

Lenders review:

• Credit history
• Current liabilities
• Bank statements
• Repayment behaviour

6. Legal Confirmation

Solicitors must confirm the seller owns the property and the title is acceptable for mortgage lending.

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What Solicitors Check in a Concessionary Purchase

Solicitors play a crucial role in verifying:

• Ownership and title
• The structure of the sale
• Gifted equity documentation
• Anti-money-laundering (AML) compliance
• Searches and enquiries
• Stamp Duty Land Tax implications

Even in a family sale, a full legal process is required.

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Stamp Duty on a Family Concessionary Purchase

Stamp Duty Land Tax (SDLT) is calculated based on the discounted purchase price, not the property’s market value.

Example

• Market value: £300,000
• Sale price: £200,000

Stamp Duty is calculated on £200,000.

First-time buyer relief or additional property surcharges may apply depending on circumstances.

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Benefits of a Concessionary Purchase From a Family Member

1. Lower or No Deposit Needed

Gifted equity can replace the cash deposit.

2. Faster and Simpler Transaction

No estate agent and minimal negotiation.

3. Strong Equity Position From Day One

The discount immediately improves the buyer’s financial footing.

4. Supportive Family Arrangement

Financial support is built into the transaction rather than provided in cash.

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Potential Challenges

• Not all lenders accept family concessionary purchases
• Discount must be supported by formal valuation
• Buyers with recent adverse credit may face reduced LTV options
• Solicitors must carefully document the gift
• Lower valuations can reduce available equity
• Stamp Duty may still be payable depending on the sale price

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Who Commonly Uses Family Concessionary Purchases?

These purchases are often used by:

• First-time buyers whose parents own a property
• Siblings passing property within the family
• Families helping relatives step into the property market
• Parents selling a second home to adult children

It allows wealth to be passed on without a full financial gift.

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Example Scenarios

Scenario 1: Full Deposit Covered by Gifted Equity

Discount: 20%
Required deposit: 10%
Outcome: No cash deposit needed.

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Scenario 2: Discount Too Small

Discount: 5%
Required deposit: 10%
Outcome: Buyer contributes 5% cash.

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Scenario 3: Low Valuation Affects Deposit

Expected value: £300,000
Valuation: £270,000
Sale price: £240,000
Gifted equity: £30,000
Outcome: Discount is less than expected; deposit may be required.

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Tips for a Smooth Concessionary Purchase

Although this is not personalised advice, buyers often prepare by:

• Ensuring the family member understands gifted equity requirements
• Preparing ID and documentation early
• Checking credit reports before applying
• Keeping bank statements stable
• Making the property accessible for valuation
• Using an experienced solicitor familiar with concessionary sales

This helps avoid delays and supports a smoother application process.

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Summary

A concessionary purchase from a family member allows a buyer to purchase a property at a discounted price, with the difference treated as gifted equity. This often replaces the need for a cash deposit and can significantly strengthen the buyer’s equity position. Lenders and solicitors carry out checks to ensure the discount is genuine, the property is appropriate for lending, and the transaction is documented correctly. With the right preparation, a concessionary purchase can be a practical and efficient route into property buying within a family.

This article provides general information only. For tailored guidance, regulated mortgage advice should be sought.