Concessionary Purchase Mortgages
The process of transfer of gift, or deed of gift, is a tough one in the property market. For example you may be gifting property to family members at a reduced price, which is a viable idea, and can benefit both participants involved in the exchange. Concessionary mortgages are often most beneficial to the person being gifted, even more so if they are a first time buyer, although you do not need to be a FTB to arrange this mortgage. There are a number of different transaction methods which are considered a concessionary mortgage, so it is important to know what the limitations are as well as the best way to go about arranging it.
Concessionary Mortgage Experts
If you want to buy a house which is sold at a lower price, you may be able to do this with a concessionary mortgage. These are sometimes known as Below Market Value, or BMV for short, or more frequently known as Gifted Equity. Below Market Value sales often occur between family members, however you are not limited to buying from relatives to obtain this mortgage. Other people include landlords, employers, property developers. It is also available regarding properties affected by section 106 legislation in regards to Key Workers.
Concessionary mortgages work by using the money saved (which is the difference between the asking price and what you paid), in place of or contributing to your deposit money. An example scenario: buying a house from a family member, which was up for sale at £150,000, however they will sell it to you at a 10% discount, providing you with £15,000 for your deposit.
How do you get gifted equity?
Most mortgage providers will require you to have a deposit which is at least 5-10% of the below market value selling price of which you are borrowing for. Some lenders will take 100% of the loan into account, regardless your application will need to meet all of their requirements.
It is important to seek out professional advice when trying to obtain gifted equity due to the requirements put in place by lenders in order to permit the purchase. Some terms deny the seller to remain living in the house following the purchase. For example if you bought the house from a family member, they would not be allowed to continue to live there. Sometimes there are tax complications which have requirements to be met also, so it is recommended to obtain independent legal advice.
Concessionary mortgages, or gifted equity, is not the same thing as gifted deposits. Gifted deposits is where the deposit is provided to you from someone out of the property chain and the property is sold at market value.