Hey! So you want a concessionary mortgage do you? Well you’re in the right place. We’re going to cover everything you need to know and by the end of this you’ll be a pro. Let’s get into it shall we?
What is a Concessionary Mortgage Anyway?
Right let’s get to the good stuff. What is a concessionary mortgage? It’s a mortgage on a home that has been offered to you below market value. These homes are often sold to family members or friends.
The Lender’s Part
Right! So let’s get one thing clear: just because Aunt Mildred is selling you her cottage for a song doesn’t mean the bank will give you the money automatically. You’ll still need to go through a lender and here’s where it gets fun.
Find the Right Lender
Not all lenders offer concessionary mortgages so you’ll need to do some research. Look for banks or building societies that have experience with these types of deals. Then ring them or pop in and have a chat. Explain your situation and see what they say. Don’t be afraid to ask questions and find out more about their policies.
Application Process
Now you’ve found your lender, it’s time to get to work. The application process is much the same as any other mortgage but with a few extra bits. You’ll need to provide:
- Proof of the property’s market value: That means an official valuation.
- Evidence of the concession: A letter from Aunt Mildred (or whoever is giving you the deal) saying the price and how they know you.
Application Process
Once you have your lender, roll up your sleeves and get to work. It’s the same as any other mortgage application but with a few more steps. You’ll need to supply:
- Proof of the property’s market value: That’s an official valuation.
- Evidence of the concession: Letter from Aunt Mildred (or whoever is giving you the deal) saying price and how they know you.
- Standard mortgage documents: Think pay slips, bank statements, etc.
Pros of Concessionary Mortgages
Now let’s get to the good stuff. Why even consider a concessionary mortgage? Here are a few reasons:
Purchase Price Lower
That’s the biggie. You’re paying less than market value so you have equity from the get-go. It’s like buying a car that’s already worth more than what you paid for it.
Smaller Deposit Potentially
Since the price is lower, the deposit required is often less. That’s a big help if you’re struggling to save the usual 10% or 20%.
Better Mortgage Rates
With a lower loan-to-value ratio (LTV), you might get better rates. Lenders see you as less risky because if it all goes wrong, they can get their money back more easily.
Cons of Concessionary Mortgages
Let’s talk about the bad stuff. Why not consider a concessionary mortgage? Here are a few things:
Limited Lender Choice
As I said earlier, not all lenders offer concessionary mortgages. That means fewer options and potentially higher rates or worse terms.
Family Drama Potential
If your concession is from a family member, be careful. Money and family are a messy mix. Make sure everything is clear and in writing so there’s no fallout later.
Lender Choice Limited
As I mentioned above, not all lenders offer concessionary mortgages. That’s fewer options and higher rates or worse terms.
Valuation Strict
Lenders will want a valuation to make sure the property is worth what you’re paying. If the price is much lower than the valuation, that’s a warning sign and makes things more complicated.
Common Concessionary Mortgage Myths
Okay, let’s get this out of the way. There are a few myths going around about concessionary mortgages we need to debunk. Understanding concessionary mortgages properly will keep these myths from scaring you off.
“It’s Too Hard”
Yes, there’s a few extra steps compared to a standard mortgage but it’s not rocket science. Once you know the process and have a good lender, it’s a breeze. Just gather the right documents and keep everyone informed.
“Only First-Time Buyers Can Get One”
Nope, not true! While first-time buyers often get concessionary mortgages, they’re not the only ones. If you’re moving up the property ladder or even downsizing, you can still get one. It’s all about the concession you’re getting, not your buyer status.
“The Property Must Be A Family Home”
Myth busted! While many concessionary mortgages involve family homes, it’s not a rule. Employers or builders offering discounts on properties can also sell you a home at a below-market price. So, whether it’s a family cottage or a new build from a generous developer, you’re in luck.
Concessionary Mortgage Alternatives
So you’re thinking “This all sounds good but what if a concessionary mortgage isn’t for me?” No problem! There are other ways to homeownership that might be more up your alley.
Shared Ownership
Shared ownership schemes allow you to buy part of a property and pay rent on the rest. Over time you can buy more shares until you own the whole property. This can be a great way to get on the property ladder without needing a big deposit.
Help to Buy
The government’s Help to Buy scheme offers an equity loan to increase your buying power. You put down 5% deposit and the government lends you up to 20% of the property’s value (or 40% in London). The loan is interest free for the first 5 years so it’s easier to afford your new home.
Guarantor Mortgages
If you have someone who will back you up, a guarantor mortgage might be the way to go. Here a family member or friend agrees to pay your mortgage if you can’t. This can get you a mortgage if your credit history or income isn’t quite strong enough on its own.
Lifetime ISA
Saving can be tough but a Lifetime ISA might help. You can save up to £4,000 a year and the government will add 25% on top. Use it towards your first home and you’ve got a nice little pot to add to your deposit.
Conclusion
So there you go! Concessionary mortgages can help you get on the property ladder. Yes, there are some hoops to jump through and a few pitfalls to watch out for but the benefits often outweigh the drawbacks. Lower purchase prices, smaller deposits and better mortgage rates can make homeownership a reality without breaking the bank.
Remember the key to concessionary mortgages is to do your homework and understand the process. Find the right lender, gather your documents and keep communication clear and open. And if a concessionary mortgage isn’t for you, there are plenty of other options out there, shared ownership or Help to Buy schemes.
Good luck and happy house hunting!