First-time buyers may be able to secure their first home through a concessionary buy. Additionally, investors may also be able to buy property to rent.
What are concessionary purchases?
Mortgage for a concessionary purchase is when a property is purchased at a fraction of its market price. You may have heard of the term ‘bmv’, or ‘below market value’. These terms can also be used to refer to a concessionary mortgage, which is a loan for the purchase of a property that is less than its current market value.
Concessional mortgages can help you buy a property at a discount.
- A family member
- Landlords
- Employers
- Developers
For property sellers who want a quick sale
Some situations are easier than others to obtain mortgages. For instance, mortgages with family members are more difficult to obtain than those where an investor is purchasing property from a private seller.
Concessionary mortgages: How does it work?
We have now defined what a concessionary purchase looks like. How would a mortgage look?
Lenders still require that you have a deposit of between 5-10%. However, some lenders will offer you 100% of your loan. It does depend on what you have done and who you apply to.
Concessionary mortgages should not be confused to mortgages that are based on gifted deposits. Gifted savings are used when family members donate funds to a buyer for the purpose of allowing them to purchase a regular house at its actual value.
Concessionary loan rates
Concessionary mortgage rate are not much different than regular mortgage rates.
The following are factors that will impact the offers you receive:
- The property will be discounted
- It doesn’t really matter if you use your own money.
- The amount that you are able and able to spend
- Credit history
- The condition and age of the property
Some lenders may also consider other factors in determining the rate offered. This applies to any type of mortgage, not just concessionary.
You may also need to make a concessionary sale
Some situations might warrant concessionary purchases. Although it’s possible, arrangements that are not within the family’s control can be very difficult to obtain.
Employees might be interested in selling, while developers may be eager to sell. Investors that have been able negotiate a below market value deal might be interested in concessionary arrangements.
These types of situations would be evaluated individually. This is due the rareness of people selling their houses for less than they are worth.
Do I have the right to purchase the property I rent from my landlord?
Tenants who live in a property over many years may decide to buy it. Landlords can reduce stress and save money by selling to their tenants. Instead of using estate agents to market their property, sellers can sell to their tenants.
For landlords to offer their tenants a reduced price, they must fulfill certain conditions.
- Discounts rarely exceed 10%
- Borrowers might need to deposit a minimum of 5%. However, some lenders may ask for higher amounts.
- The property must not have seen a tenant for more than one year.
These conditions aren’t always set in stone. A lender may grant a mortgage even with discounts greater than 10%.
Some lenders offer concessionary loans without the requirement of a physical deposit. There are few discounted property sales that involve tenants or landlords. This is why it’s rare for lenders to offer mortgages in this location.