Could you buy the home you already rent if your landlord decides to sell?
Is your landlord selling your home? This can be a stressful situation. However, it may also present a unique opportunity. Instead of moving, you may be able to buy the property yourself with a concessionary purchase mortgage.
If you would like to explore this, I can help. My mortgage services across Cornwall, Devon and the wider UK can show you what may be possible.
What is a concessionary purchase mortgage?
A concessionary purchase is when someone buys a property below its full market value. This may involve buying from a family member or landlord. Some lenders may also consider a purchase from an ex-partner. However, their rules can vary.
The gap between the market value and the price you pay is often called gifted equity. Some lenders may accept this discount as part or all of your deposit.
For example, your landlord’s property may be worth £250,000. They agree to sell it to you for £225,000. The £25,000 discount represents 10% of the market value. A lender may accept that discount as your deposit. This will depend on its own valuation and rules.
Some lenders may still ask you to add your own money. The lender will also decide how it works out the loan-to-value. It will look at the valuation, sale price and discount.
A mutually beneficial agreement
A landlord concessionary purchase can help both the landlord and the tenant.
Why it can benefit the tenant
- No need to move: You may be able to stay in the home you know. This avoids the need to find somewhere else to rent.
- Stay in your area: You can remain close to work, schools, family and local connections.
- Help with the deposit: The discount may be treated as gifted equity. This could reduce or remove the need for a cash deposit.
- Lower moving costs: You may avoid removal costs. However, you must still budget for the normal costs of buying a home.
Why it can benefit the landlord
The discount may be acceptable to a landlord because it offers a more direct sale.
- Avoid empty periods: The landlord may receive rent until completion. This can avoid an empty property while a buyer is found.
- Reduce running costs: A direct sale may avoid some bills and council tax on an empty property.
- Potentially avoid agency fees: An estate agent may not be needed. The landlord should still check any agency agreement.
- Reduce chain issues: A tenant who is not selling another property may remove one part of the chain. However, no sale is guaranteed.
- A simpler sale: The landlord is selling to someone who knows the property. The tenant also wants to remain there.
Costs and tax considerations
Buying the home you rent may reduce some moving costs. It does not remove the usual costs of buying a property. You may still need to pay for legal work, searches, a survey and mortgage fees. Buildings insurance and property tax may also apply. MoneyHelper’s guide to mortgage fees and home-buying costs provides a helpful overview.
Capital Gains Tax may apply if the landlord sells an investment property or second home. In some cases, HMRC may use the market value rather than the lower sale price. The landlord should ask an accountant for advice before agreeing the discount.
Find out whether you qualify
Certain criteria must be met before this type of mortgage can be approved. The lender will check your income, spending and credit history. It will also decide if you can afford the repayments. The property will need a suitable valuation.
You will normally need proof of your identity and address. You will also need proof of income and recent bank statements. The lender or solicitor may ask for evidence of your tenancy and rent payments. They may also need a letter that confirms the discount is a true gift of equity. My mortgage application documents guide explains the paperwork you may need.
The purchase will then follow the usual legal and mortgage stages. My UK house-buying timeline explains the process from the first mortgage talks through to completion.
If your landlord plans to sell, please contact me for a straightforward conversation. I can assess your situation and explain whether a concessionary purchase mortgage may work for you.
We may charge a fee for mortgage advice. The exact amount will depend on your circumstances, but a typical fee is £350.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Anna Wilson Mortgage Services is a trading name of Monster Insurance Services Ltd and is registered in England and Wales at: 71-75 Shelton Street, Covent Garden, London, WC2H 9JQ. Registered in England No. 9864526. Authorised and regulated by the Financial Conduct Authority.
