It might sound too good to be true, but there’s a new type of mortgage that lets tenants buy their rented homes without needing to save a penny for a deposit.

A Landlord’s Gift: The Concessionary Purchase Mortgage

Lenders like TSB, Halifax, Nationwide, Barclays, and NatWest are offering “concessionary purchase” mortgages, which allow tenants to buy their current homes from the landlord at a discounted price. This means the landlord takes a hit on the sale price, but they get a smooth, quick sale without the hassle of estate agents and empty months without rent.

How it Works

The mortgage works like a standard mortgage, but the landlord agrees to sell the property for at least 10% below its market value. This discount is a “gift” to the tenant, and the lender counts it as a deposit. So, if the discount is 10%, the buyer only needs a 90% LTV mortgage.

Why Landlords Are Saying “Yes”

The buy-to-let market has got tougher, with tax changes and rising interest rates making it less attractive for some landlords. Many are choosing to sell up, and a quick sale to a tenant is very appealing.

Landlords can save on:

• Estate agent fees: These can be as high as 3.5% of the sale price.
• Mortgage interest: They won’t be paying interest on the property while it’s empty and on the market.
• Time and stress: They avoid the hassle of marketing the property, dealing with viewings, and negotiating with potential buyers.

What’s in it for the Tenant?

It’s a dream come true for tenants! They get to:

• Buy their home without a deposit: This is a huge advantage, especially in a market where deposits are getting bigger and bigger.
• Save money on the purchase price: They’re getting a guaranteed discount of at least 10%, which could be thousands of pounds.
• Buy a property they know and love: They’re already living in the property, so they know everything about it, from the neighbours to the heating system.

The Catch?

While it’s a great deal for tenants, landlords do take a financial hit. However, the savings they make on estate agents and mortgage interest can offset a good chunk of the discount. It’s a win-win situation for both parties if the landlord is happy to help a long-term tenant become a homeowner.

The Future of the Concessionary Mortgage

With more landlords looking to exit the market and rising mortgage rates making it harder for tenants to save for a deposit, concessionary purchase mortgages are likely to become increasingly popular. It’s a clever solution that could benefit both landlords and tenants – a real win-win situation.