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Below market value mortgage

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Feb 16, 2023

Below market value mortgage – How to get one the easy way…

Important facts to remember when buying a property below market value.

This guide will explain what you should do if you buy a house from someone which is below market value, how it affects your taxes, and which mortgage lenders offer below-market value finance.

Your mortgage adviser will discuss property finance and market value properties and introduce you to a mortgage lender to suit your needs.

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Are mortgages available for properties that are less than market value?

Yes, property finance is available for a property below market value. However, you need to understand the details of the process and how it differs from a standard residential mortgage. The most important thing is that the facts of your sale will influence mortgage lenders.

A BMV mortgage is possible if you meet the affordability and eligibility requirements. However, lenders will closely review your mortgage application and valuations if you buy a property sold from a family member.

These are the circumstances that would make a house available.

There are many legitimate reasons to purchase a house below its estimated market value.

These are some of the critical circumstances that make this a realistic scenario.

  • I am selling a house to a relative – buying a home from a relative.
  • A property could be undervalued and sold below market value to secure a quick sale.
  • Financial problems can be a powerful motivator to lower the home’s price.
  • Sometimes properties purchased in auctions can sell below their market value.

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A family member can purchase a house below the market value

This is the number one reason a house is purchased below market value. This can be an excellent way for property owners and their families to help each other climb the property ladder. This could save you money on estate agent fees, advertising, and less stamp duty.

Concessionary purchase

Some mortgage lenders will consider this a concessionary purchase if you are in the UK and intend to purchase a house. This is because these lenders might allow the difference in the market value and the purchase price to be used for a deposit on the BMV mortgage.

This could mean that no mortgage deposit will be required on your part. However, lenders that will consider this arrangement may have additional rules. Many lenders will not allow this arrangement to be applied to immediate family members. A few will accept extended family. Others will place restrictions on deposits and limit the loan-to-value limits.

How a broker can assist with a BMV Mortgage

A specialist broker is the best way to find the right mortgage for a house you buy at a lower price than its market value. An experienced broker can help you determine the best mortgage for your specific circumstances.

Our brokers are experienced in securing BMV loans for clients. This means they can examine your finances and determine why you want to buy the property. They can help you find the best lender and advise you about tax implications.

No matter your individual circumstances, we are here to get you a mortgage offer. All of our mortgage brokers are regulated by the financial conduct authority.

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Tax implications for buying a house below market value

Depending on how you buy a house below its market value, there may be tax implications. This is especially true if your family members are based in the UK.

The tax does not apply to the sale or transfer of a primary residence. However, it is usually applied to any other property. The property’s market value calculates the potential capital gains tax due. The capital gains tax amount will depend on the tax bracket of the sellers and their circumstances.

These lenders offer this type of mortgage

Your circumstances and the specific lender available will vary depending on what you are looking for. Here are some examples to help you understand the range of options available.

  • HSBC
  • Bluestone Mortgages
  • Clydesdale Bank

A specialist broker is the best way to explore all of your below-market value transaction options. They have relationships with lenders that will allow them to access mortgages and other deals unavailable to the general public. This is the best way to explore all your below-market value finance.

There are specific eligibility requirements for a BMV Mortgage

Some lenders may have rules about specific types of purchases.

  • Loan to Value (LTV), some lenders may have strict rules about the maximum loan-to-value (LTV). This ratio is what they will offer to buy a house that is less than its market value. This could be related to the purchase price or market valuation. Depending on the lender, the maximum range could be 70-95% of the sale price or valuation.
  • Deposit: Some lenders may still require a minimum deposit. This deposit cannot be gifted, and there may be other rules.
  • Seller relationship: The relationship between buyer and seller can be significant. Each lender might have its definitions of what it considers close relatives or family members.
  • Vendor restrictions after the sale, the seller or the person selling the property may have to follow specific rules. Extra safeguards may be put in place by lenders, including the requirement to obtain professional advice if the seller is older than 75.
  • Sign-off by a Solicitor: before discussing a BMV mortgage, some lenders may require a confirmation from a solicitor.


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Things to Consider

These are some of the negatives you must consider before applying for a mortgage on a property below its market value.

  • Take into account any tax obligations and inheritance tax.
  • Some lenders may not be comfortable with your credit score or have strict criteria for eligibility.
  • Sometimes, you will need to seek advice from an expert who can look at all your finances.
  • Some lenders may offer BMV property finance at a lower rate or with fewer terms.

Talk to a BMV mortgage expert.

If you are having financial difficulties, expert support is worth it if you want to buy a house below property value.

Expert brokers will not only advise you on the best course, but they will also help you find the best deal at the most affordable rates and terms.

Our brokers have a lot of experience in securing competitive BMV mortgages for their clients. We offer a free broker-matching service that will quickly assess your requirements. Then, we’ll match you with an experienced advisor who best suits your needs.

Enquire below whether you are property investors looking for a commercial mortgage, bridging finance, first-time buyer or auction properties; we have access to most lenders with competitive rates. The financial conduct authority regulates each broker.


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What stamp duty do I have to pay to purchase my parents’ house?

It could depend on the rules that were in place when you bought the house. Stamp duty can be avoided if your parents own the home in full. Stamp duty can also be reduced if your parents buy the house at less than its market value. This is because the tax is based on the sale price, not the market value.

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