Concessionary purchase mortgages

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Concessionary purchases

It’s becoming increasingly common for family to sell to other family members at a discounted price, this is called a concessionary purchase, you are able to save thousands of pounds by selling the property at a reduced rate, which means you need a lower deposit and lower total mortgage, leading to more affordable monthly payments, it’s also a great way to help family get on the property ladder.

Landlords can also choose to sell their property to long-term tenants for less than market value, which can avoid the stress and hassle of putting the property on the open market when they're ready to cash in on their investment. Plus, they can save thousands on estate agent fees as it would be a private sale.

Mortgage terms and interest rates for concessionary purchases will usually be similar to standard mortgages, the normal factors such as your income, credit history and personal circumstances will affect which lenders you can go to, but the bottom line is not all lenders accept concessionary purchases, this can mean that you as a borrower can tick all the boxes, but your situation doesn’t. On the surface, this doesn’t look like a problem, but if you have to go to multiple lenders it can lead to multiple credit check which will bring down your overall credit score, in turn limiting the available lenders even further, so it is vital to get the right lender first time.

At CLS Money, we can help you find a lender who will take the discounted purchase price into consideration and underwrite your agreement accordingly, eliminating the possibility of a tarnished credit score. Our brokers will find you the right deal and manage the entire application process from start to finish, leaving you to look forward to receiving the keys to your brand-new home!

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6 reasons to choose CLS Money

  • Mortgages that suit you

    Mortgages that suit you

    No matter your circumstances, we are here to get the right mortgage for you.

  • Appointments at your convenience

    Appointments at your convenience

    We can meet you seven days a week from 8am to 8pm at a place that suits you, whether it be at your home, place of work or our offices.

  • Free of charge, no obligation advice

    Free of charge, no obligation advice

    Our advice is completely free and there is no obligation to proceed with us if you are not entirely satisfied with the mortgages we recommend

  • At your side

    At your side

    We handle the entire mortgage application process through to completion, liaising with your lender, solicitor and estate agent to deliver a smooth, stress-free experience

  • With you all the way

    With you all the way

    As a responsible broker, we want your mortgage to always be the best fit for you. So when it's time to review it, we will be here to help.

  • Protecting what matters most

    Protecting what matters most

    We provide tailored life and home insurance solutions, so you can be assured that your loved ones and possessions are protected.

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What are the associated costs with buying a house?

When buying a home, you will need to not only have enough money saved for your mortgage deposit, but also your mortgage fees, moving costs and legal expenses. We have compiled a handy list below of all the possible purchase and moving expenses you may have to pay, to help you with your budgeting. The exact fees and amount you will pay, is dependent on the value of the property you are buying and your chosen mortgage lender.

Mortgage booking fee: Some mortgage lenders will charge this to secure a fixed-rate or tracker deal.

Cost: £99 - £250

Mortgage arrangement fee: Some mortgage products will incur a mortgage arrangement fee, in addition to the mortgage booking fee. This fee is either paid upfront or added to your mortgage debt. If you chose to add it to your mortgage, the cost will increase over the lifetime of your mortgage.

Cost: £1,000 - £2,000

Telegraphic transfer fee: Needs to be paid to the lender to transfer the amount you are borrowing for the mortgage to the seller's solicitor.

Cost: £25 - £50

Mortgage broker fee: If you use a mortgage advisor to arrange your mortgage for you, you will need to pay a fee or commission, depending on the value of your mortgage.

Cost: £95 - £495. However, this may vary if you need to use a specialist lender

Valuation and survey fees: Charged by the lender to value the property you are buying. The cost varies according to which survey you choose:

Home condition survey: Most basic and cheapest of all the surveys and often used for new-builds.

Cost: £250

Homebuyer's report: More in-depth survey, assessing the inside and outside of the property, and also includes a valuation.

Cost: £400

Building survey: A complete survey generally used for older or unconventional properties. Although they are the most expensive, they are certainly worth considering, as it could potentially save you a lot of money if any structural problems are found with the property.

Cost: £600

Higher lending charge: Can be charged by lenders if you borrow most of the value of the property.

Cost: Approximately 1.5% of the amount you borrow

Searches: Your solicitor will arrange for the local authority to check whether there are any issues that could affect the property's value. The local council can charge a fee for carrying out these searches and may also request that a drains search be done at the same time.

Cost: £250 - £300

Legal costs: You will need to instruct a solicitor to carry out the necessary legal work for you.

Cost: £850 - £1,500 plus VAT

Stamp Duty Land Tax (SDLT): Charged on all purchases of UK land and property over £125,000. However, the amount you will pay is dependent on the purchase price of the property you are looking to buy, and whether you have owned a home before as follows:

First home: First-time buyers are exempt from paying SDLT on the first £300,000 of the purchase price of a property up to the value of £500,000. All purchases in excess of £500,000 will pay the standard stamp duty rates as follows:

  • £0 - £300,000: 0%
  • £300,001 - £500,000: 5%

Next home: If you are currently or have previously been a homeowner, you usually pay SDLT on increasing portions of the property price:

  • £0 - £125,000: 0%
  • £125,001 - £250,000: 2%
  • £250,001 - £925,000: 5%
  • £925,001 - £1.5 million: 10%
  • £1.5 million+: 12%

Second property: If you are looking to buy an additional property, you usually have to pay 3% on top of the normal SDLT rates as follows:

  • Less than £125,000: 3%
  • £125,001 - £250,000: 5%
  • £250,001 - £925,000: 8%
  • £925,001 - £1.5 million: 13%
  • £1.5 million+: 15%

For example, if you buy a next home for £275,000 the SDLT you owe is calculated as follows:

0% on the first £125,000 = £0

2% on the next £125,000 = £2,500

5% on the final £25,000 = £1,250

Total SDLT = £3,750

Information correct as of December 2017 - Source: www.gov.uk/stamp-duty-land-tax... costs: Paid to the removal firm (if you choose to use one) to pack, transport and deliver your possessions to your new home.

Cost: £300 - £600

What type of mortgage do I need?

For the majority of mortgages, you borrow money from a lender to buy a property and pay interest on the loan until you have paid it back. The only exception are interest-only loans. Here are the different types of mortgages available:

  • Repayment
  • Interest-only
  • Fixed rate
  • Variable rate
  • Tracker
  • Discounted rate
  • Capped rate
  • Cashback
  • Offset
  • 95%
  • Flexible
  • First time buyers
  • Buy to let

Repayment mortgages: Every month you make a payment which is calculated so that you pay off some of the capital you have borrowed, as well as the interest. By the end of your mortgage term, you would have repaid the entire loan.

**Interest-only mortgages: **Each month you pay only the interest on your mortgage and repay the capital at the end of your mortgage term. This option will not suit everyone, as you will need to guarantee that you can find the money when the time comes. If you don't, you risk having to sell your property to pay off the mortgage. Lenders can also insist that you provide evidence on how you intend to do this.

Fixed rate mortgages: Popular with first time buyers, as you know exactly how much you'll be paying each month for a particular length of time.

The disadvantages are that you may have to pay a higher rate if the interest rate falls, and a repayment charge if you either switch or pay off your mortgage before the end of the fixed term.

The lender will also automatically place you on a standard variable rate (SVR), which will probably have a higher interest rate, in which case you will need to apply for another fixed rate deal.

**Variable rate mortgages: **Also known as a Standard Variable Rate (SVR) and are every lender's basic mortgage. The interest rate fluctuates, but never above the Bank of England's base rate and is determined by your mortgage lender.

Tracker mortgages: Vary according to a nominated base rate, normally the Bank of England's, which you will pay a set interest rate above or below.

Discount rate mortgages: Some of the cheapest mortgages around but, as they are linked to the SVR, the rate will change according to the SVR and are only available for a fixed period of time.

Capped rate mortgages: A variable rate mortgage, but there is a limit on how much your interest rate can rise. However, as mortgage rates are generally low at present, many lenders are not offering them.

Cashback mortgages: Lenders typically give you a percentage of the loan back in cash. However, you need to look at the interest rate and any additional fees, as it is very likely that you will be able to find a better deal without cashback.

Offset mortgages: Combines your savings and mortgage together, by deducting the amount you have in your savings, meaning you only pay interest on the difference between the two. Using your savings to reduce your mortgage interest means you won't earn any interest on them, but you will also not pay tax, helping higher rate taxpayers.

95% mortgages: Generally for those with only a 5% deposit. However, as there is a risk that you may fall into negative equity if house prices go down, mortgage rates are usually high.

**Flexible mortgages: **Allow you to overpay when you can afford to. Other mortgages give you this option too, but you can also pay less at particular times or miss a few payments altogether if you have chosen to overpay. This does however come at a cost, as the mortgage rate will generally be higher than other mortgage deals.

First time buyers mortgages: All of the aforementioned mortgages are available to first time buyers, although some are more favourable than others. The government also offers a number of incentives for first time buyers through its help to buy scheme.

Buy to let mortgages: Enables you to purchase additional property for renting purposes only. The amount you can borrow is partially calculated on the rent payments you expect to receive.

How much does a mortgage cost?

The amount you pay each month is dependent on the total cost of your property and the type of mortgage you have. The costs you may need to pay vary but typically include:

Interest: Accrues across the lifetime of the mortgage and is charged as a percentage rate on the amount you owe.

Mortgage fees: A product fee which is charged for taking out the mortgage.

Application fees: Charged on application, regardless of whether you take out the mortgage.

Valuation fees: Can be charged by lenders for calculating how much your home is worth.

Higher lending charges: Can be applied to mortgages that have a small deposit.

**Telegraphic transfer fees: **Charged by the bank for arranging to transfer the money they are lending you (usually to your solicitor).

**Broker fees: **Often charged if you use a broker to arrange your mortgage.

**Early repayment charges: **Can be charged if you repay your mortgage before the end of the agreed term.

**Exit fees: **Lenders can charge these if you move to a new lender.

**Missed payments: **These can be charged by your lender if you fail to keep up your repayments, which can increase the total amount you owe.

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Looking to move home or remortgage? Watch the latest vlogs from our mortgage advisors, packed full of handy tips, to help you get on the property ladder and save on your mortgage

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