Mortgages For Houses Bought Below Market Value (BMV)

When buying a house under the estimated market value, there are some important things you need to know about how this property type can impact the mortgage application process.

If you want a mortgage for a property under such circumstances, this guide covers all the essential details you should understand first. You’ll learn what to do if you’re buying a house from a family member, how it impacts your taxes, and what lenders provide BMV mortgages.

Keep reading for a complete explanation or click on a link below to jump straight to a section…

Can you get mortgages for a property sold below market value?

Yes, this is definitely possible. But, there are some crucial points you should understand about the process and how it differs from a regular mortgage. Most importantly, the circumstances of the sale will make the biggest difference with some lenders.

However, providing you meet the affordability and eligibility requirements, a BMV mortgage can be straightforward to obtain. But, if you’re buying the house from a family member, expect your valuations and mortgage application to be looked at closely by lenders.

Why would a house become available under these circumstances?

There are plenty of legitimate reasons why you might be looking to buy a house under its estimated market value.

Here are a few of the main circumstances under which this is a realistic scenario:

• Buying a house from family members – selling a house from one family member to another.
• Deliberately undervalued – a property might be undervalued to secure a quick sale.
• Financial difficulties – can be a strong motivator for lowering the price of a home.
• Auction sale – properties bought in an auction can sometimes sell below market value.

Buying a house from family below market value

This is one of the most frequent reasons a house is bought under market value. It can be an excellent way for property owners to help family members get on the property ladder. It could also mean saving money on advertising and estate agent fees along with paying less stamp duty.

Concessionary purchase

If you’re in the UK and buying a house under these circumstances, some lenders would class this as a concessionary purchase. The benefit of this is that these lenders may allow the difference between the market value and the buying price to be used as a deposit for the BMV mortgage.

The main advantage is that this could mean no mortgage deposit is needed on your part. But, the majority of lenders who’ll consider this arrangement will sometimes have additional rules. Most will only allow this to apply with immediate family members, a few will consider extended family, and others will have restrictions around deposits and loan-to-value (LTV) limits.

How a broker can help with a BMV mortgage

Using a specialist broker will be your best way of finding the right mortgage when buying a house for less than its estimated market value. You will have specific reasons for this, and an experienced broker will be able to advise you accordingly.

The brokers we work with are experts in securing BMV mortgages for their clients. In practice, this means they can take an in-depth look at your finances and reasons for buying the property. They will then advise you on any tax implications and introduce you to the most suitable lender.

If you want to speak with an expert broker, just make an enquiry. We’ll set up a free, no obligation chat between you and your ideal BMV mortgage broker today.

Tax implications when buying a house under market value

Depending on the circumstances under which you’re buying a house for below its market value, there can be certain tax implications to think about. This is particularly true if you’re buying from a family member based in the UK.

Here’s a breakdown of the main taxation areas to consider:

Lenders who provide this type of mortgage

The exact lenders available will depend on your circumstances and the property in question. But, to give you an idea of the selection of choices available, here are a few examples:

• HSBC
• Bluestone Mortgages
• Clydesdale Bank

Your best way of exploring all your BMV mortgage options is by using a specialist broker. This is because they will have existing relationships with lenders, allowing access to mortgages and deals not advertised to the general public.

Specific eligibility criteria for a BMV mortgage

For some lenders, there will be rules around parts of the eligibility criteria for these types of purchases:

• Loan-to-Value (LTV): certain lenders will have rules around the maximum loan-to-value (LTV) ratio they are willing to offer when buying a house below its market value. This can be related to the market valuation or the purchase price. The maximum range can often be between 70-95% of the valuation or sale price, depending on the lender.

• Deposit: some lenders will still require at least a small deposit. And, there can be rules that this deposit cannot be gifted.

• Relationship with seller: the relationship between the buyer and the seller can make a difference. Each lender may have its own definition of what it considers a close relative.

• Vendor restrictions: there can be rules that the vendor or person selling the house is not allowed to reside in the property after the sale is completed. Some lenders will also have extra guard rails in place, such as the need to seek professional advice first if the seller is over 75.

• Solicitor sign-off: some lenders will require confirmation from a solicitor that everything is above board before they will discuss a BMV mortgage.

Things to consider

Here are a few of the downsides that you should think about before you look for a mortgage when buying a house below its market value:

• Consider any potential tax obligations.
• Some lenders won’t be comfortable or will have strict rules around eligibility.
• Advice from an expert who can take a look at your whole finances is often necessary.
• Certain lenders will offer less competitive deals or terms for a BMV mortgage.

Speak with a BMV mortgage expert

If you’re planning on buying a house under the estimated UK market value, getting some expert support is well worth it. Not only will they advise you on the best course of action, but an expert broker will also find you a top deal with the lowest rates and most suitable terms.

The brokers we work with have plenty of experience securing competitive BMV mortgages for their clients. Our free, broker-matching service means that we’ll quickly assess your needs. And then, introduce you to an experienced advisor that fits your circumstances.

Just call 0808 189 2301 or make an enquiry. We’ll set up a free, no obligation chat today.