Lender Requirements for a Family Concessionary Purchase: Full Guide

Family concessionary purchases are increasingly common, allowing a buyer to purchase a property from a relative at below market value. The discount becomes gifted equity, which many lenders allow as the full deposit. However, to protect against financial and legal risk, lenders apply additional checks to ensure the transaction is genuine. Understanding lender requirements for a family concessionary purchase helps buyers and family members prepare properly and avoid delays.

This guide explains how lenders assess family concessionary sales, the documents they need, and the factors that influence mortgage approval. It 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 is when a relative sells a property to a family member at a reduced price, creating instant equity for the buyer.
Example:

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

This discount is treated as gifted equity and may replace a cash deposit.

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Why Lenders Apply Extra Requirements

Lenders must ensure:

• The discounted amount is a genuine, unconditional gift
• No repayment is expected
• The sale is not being used to hide debt or financial arrangements
• The property value and condition support the loan
• The buyer can afford the mortgage sustainably

Because family sales are not exposed to the open market, lenders take extra steps to verify the legitimacy and structure of the transaction.

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Key Lender Requirements for a Family Concessionary Purchase

Below is a detailed breakdown of what lenders typically require.

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1. Independent Property Valuation

Lenders instruct their own surveyor to confirm:

• True open-market value
• Whether the discount is genuine
• The property’s suitability as mortgage security
• Any structural or legal issues

The valuation determines the LTV (loan-to-value) ratio, usually based on market value, not the discounted price.

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2. Gifted Equity (Discount) Letter

One of the most important lender requirements for a family concessionary purchase is the gifted equity letter.

This must confirm:

• The seller is gifting the discount
• No repayment will ever be required
• The seller will not retain any stake in the property
• The amount of equity being gifted
• Names of both buyer and seller

Lenders rely on this letter to ensure transparency.

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3. Proof of Relationship

Some lenders request evidence of the family relationship, especially where:

• Names differ
• The family chain is not obvious
• The discount is unusually large

Examples of acceptable proof can include:

• A declaration of relationship
• Birth or adoption certificates

Not all lenders require this, but buyers should be prepared.

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4. Standard Affordability Checks

Even with a significant discount, affordability still determines approval.

Lenders assess:

• Income stability
• Employment history
• Outgoings and commitments
• Debt levels
• Stress-tested future affordability

The discount does not override affordability rules.

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5. Credit Checks and Financial Behaviour

Lenders review:

• Credit score and repayment history
• Defaults, CCJs, or missed payments
• Bank statement conduct
• Existing borrowing patterns

A strong gifted equity position may improve options, but adverse credit can still limit lender choice.

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6. Bank Statements

Typically, lenders request 3–6 months of statements to review:

• Salary credits
• Regular bills and payments
• Lifestyle spending
• Overdraft usage
• Rent or mortgage history

This helps assess financial stability.

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7. Seller’s Ownership Verification

Lenders require confirmation that the seller:

• Legally owns the property
• Has the right to sell
• Will clear any outstanding charges or mortgages from sale proceeds

Solicitors carry out this check, but lenders rely on the outcome.

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8. Source of Funds (If Buyer Contributes Extra)

Even if the discount covers most or all of the deposit, buyers who contribute additional funds must:

• Provide bank statements showing savings
• Prove legitimate source of funds
• Confirm no repayable loans form part of the deposit

This is part of anti-money-laundering compliance.

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9. Confirmation That No Side Agreements Exist

Lenders require certainty that:

• The buyer will not repay the discount privately
• No additional loans or charges exist between family members
• There is no informal co-ownership structure

Any undisclosed arrangement can cause the lender to withdraw.

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10. Acceptable Property Condition

The valuation report must confirm:

• No significant structural issues
• Adequate home condition
• Compliance with lender property standards

Issues such as damp, old electrics, or subsidence may require repairs before lending.

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11. Legal Checks Carried Out by Solicitors

Although not handled directly by lenders, they require confirmation that solicitors have:

• Conducted full searches
• Confirmed title is clean
• Verified gift documentation
• Ensured compliance with mortgage conditions

Lenders will not release funds until all legal checks are satisfied.

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LTV Rules for Family Concessionary Purchases

Lenders typically calculate loan-to-value based on the market value, not the discounted price.

Example

• Market value: £300,000
• Sale price: £240,000
• Mortgage amount: £240,000
• LTV = 80%

Even though you’re borrowing 100% of the sale price, the LTV remains within lender tolerance due to gifted equity.

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When Lenders May Decline a Family Concessionary Purchase

Declines can occur when:

• The discount appears repayable
• Valuation results do not support the price
• The property has defects
• Affordability is tight
• Adverse credit is recent or unresolved
• AML documentation is insufficient

Specialist lenders may consider more complex cases through manual underwriting.

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Common Questions Buyers Ask

1. Do all lenders accept family gifted equity?

No, but many do. Policies vary widely.

2. Can I buy with no deposit?

Yes, if the discount meets minimum deposit levels.

3. Is a solicitor still needed in a family sale?

Absolutely. Legal checks are essential to protect all parties.

4. Does the discount affect Stamp Duty?

Stamp Duty is based on the purchase price, not the market value.

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Tips to Prepare for a Smooth Family Concessionary Purchase

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

• Ensuring income and bank statements are clear and current
• Gathering ID and proof of address early
• Asking the seller to prepare gifted equity documentation
• Making the property accessible for valuation
• Checking credit files for any issues

Strong preparation helps reduce delays.

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Summary

Understanding lender requirements for a family concessionary purchase helps ensure the process runs smoothly. Lenders look at affordability, valuation, the structure of the discount, relationship evidence, credit behaviour, and legal compliance. Many buyers successfully use gifted equity from family members as their deposit, but clear documentation and thorough checks are essential.

This article provides general information only. For personalised advice, regulated mortgage guidance is required.