Deposit on a Family Concessionary Purchase: How Much You Need

A family concessionary purchase is one of the most flexible routes into property for buyers who have a supportive relative willing to sell at below market value. The discount becomes gifted equity, which many lenders allow to count as the buyer’s deposit. But the key question for most people is simple: how much deposit on a family concessionary purchase do you actually need?

This guide explains how lenders calculate deposits on concessionary sales, when no cash deposit is required, and the situations where a buyer may still need to contribute funds. This article provides general information only and does not offer regulated mortgage advice.

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What Is a Family Concessionary Purchase?

A family concessionary purchase occurs when a family member sells a property to a relative at a discounted price.

Example

• Market value: £300,000
• Sale price: £240,000
• Discount: £60,000 (gifted equity)

If accepted by the lender, this £60,000 may replace the full deposit requirement.

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How Lenders Calculate the Deposit Requirement

Lenders mainly look at two figures:

1. The property’s market value (confirmed by a valuer)
2. The discounted purchase price

The key difference in deposit on a family concessionary purchase compared with a standard purchase is that lenders usually calculate the loan-to-value (LTV) using the market value, not the discounted price.

Example

• Market value: £300,000
• Borrowing: £240,000
• LTV = 80%

Even though you are borrowing 100% of the sale price, the LTV remains acceptable because of the gifted equity.

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When You May Not Need Any Cash Deposit

Many lenders allow the discount alone to meet their deposit requirement. You may not need a cash deposit if:

• The discount meets or exceeds the lender’s minimum deposit requirement
• The gifted equity letter confirms no repayment is expected
• The valuation supports the market value
• There are no major credit issues that require additional deposit
• The lender accepts family concessionary purchases

Example (No Deposit Required)

• Required deposit: 10%
• Market value: £300,000
• Discount: £60,000 (20%)

Here, the discount is more than enough to cover the deposit.

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When You Do Need a Cash Deposit

There are scenarios where lenders require additional cash, even in a concessionary purchase.

1. The Discount Is Too Small

If the discount is 5% but the lender requires a 10% deposit, you must make up the difference.

2. The Valuation Is Lower Than Expected

If the valuer assesses the property at £280,000 rather than £300,000, the discount is effectively reduced.

3. You Have Recent Adverse Credit

Some lenders tighten LTV limits for borrowers with:

• Recent defaults
• CCJs
• Missed payments
• High credit usage

4. The Lender Does Not Accept Gifted Equity Alone

A few lenders require the buyer to contribute at least part of the deposit in cash.

5. Unusual Family Structures

Where the relationship is unclear, lenders may request stronger deposit positions.

Example (Cash Top-Up Required)

• Market value: £300,000
• Discount: £15,000 (5%)
• Lender requires 10% deposit (£30,000)
• Buyer needs to provide £15,000 cash

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How the Valuation Affects Deposit Requirements

Valuation is a key factor in deposit on a family concessionary purchase. The lender’s valuation—not the family’s estimate—determines the true market value.

If the valuation is higher than expected:

• The discount increases
• LTV decreases
• Deposit requirement is easier to meet

If the valuation is lower than expected:

• Discount decreases
• LTV increases
• More lenders may require cash deposit

This is why preparing the property for valuation can help avoid complications.

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Gifted Equity vs Gifted Cash Deposit

In a concessionary purchase:

• Gifted equity is built into the transaction
• No money is transferred

In a standard purchase:

• Gifted cash must be documented and sourced
• AML checks apply to the donor’s finances

Some lenders accept gifted equity without the donor showing bank statements, making the process more straightforward.

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Standard Deposit Requirements (Typical Scenarios)

Here’s a general guide to what lenders often require. Note: these are not rules, only patterns often seen in the UK mortgage market.

Concessionary Purchase With Strong Credit

• LTV accepted: Often up to 90% based on market value
• Deposit required: Sometimes none

Concessionary Purchase With Minor Adverse Credit

• LTV accepted: Often reduced to 85–90%
• Deposit required: Discount may still cover it

Concessionary Purchase With Recent or Serious Adverse Credit

• LTV accepted: 60–80% depending on severity
• Deposit required: Usually a blend of discount + buyer cash

Discount Under 10%

• Cash deposit likely required unless lender has specialist criteria

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Documentation Needed to Confirm the Deposit

To support the application, lenders generally require:

1. Gifted Equity Letter

Must include:

• Amount of equity gifted
• Confirmation gift is unconditional
• Assurance of no repayment
• Names of both parties

2. Valuation Report

Confirms:

• Market value
• Sale price
• Discount amount
• Condition of the property

3. Relationship Confirmation

Some lenders request proof of family connection.

4. Buyer’s Standard Mortgage Documents

Income, ID, bank statements, and credit checks.

5. Seller’s Proof of Ownership

Handled by solicitors.

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Example Deposit Scenarios

Scenario 1: No Deposit Needed

• Market value: £280,000
• Sale price: £230,000
• Discount: £50,000
• Required deposit: 10% (£28,000)

Discount covers the deposit fully.

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Scenario 2: Small Cash Top-Up Needed

• Market value: £300,000
• Discount: £15,000
• Required deposit: £30,000

Buyer contributes £15,000 cash.

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Scenario 3: Adverse Credit Case

• Lender limits LTV to 75%
• Market value: £300,000
• Maximum borrowing: £225,000
• Sale price: £240,000

Buyer must contribute £15,000 cash even with a discount.

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Tips to Strengthen Your Position

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

• Checking credit reports early
• Keeping bank statements free from irregularities
• Preparing landlord or employment documents
• Ensuring a clean explanation of the discount
• Making the property accessible for valuation

Preparation helps prevent delays.

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Summary

Understanding the deposit on a family concessionary purchase is essential when considering buying a home from a relative at below market value. In many cases, the gifted equity completely replaces a cash deposit, but lender criteria, valuation outcomes, and credit history can affect how much deposit you ultimately need. While some buyers proceed with no deposit at all, others may need to top up with cash, depending on the structure of the discount and the lender’s requirements.

This article provides general information only. For tailored guidance, a regulated mortgage adviser should be consulted.