Case Study: Gifted Equity – How You Could Buy a Home Below Market Value

by Adam Tovey – Director | Independent Mortgage & Protection Adviser @ Prism Mortgage & Protection Advice

In this case study, I outline how having access to the whole of the market and the ear of decision makers allowed me to help first-time buyers navigate the complexities of buying a home with gifted equity.

What is gifted equity? A gift of equity is a way for a seller to help buyers, usually family members, purchase a home. The seller doesn’t give the buyers money as they would when giving cash for a gifted deposit.  Instead, they agree to sell their property below market value. This gives the buyer immediate access to equity that they did not ‘pay for’.

Customer Background:

My customers are busy young professionals on upward trajectories in their careers.  Video appointments and a paper-free process were essential.

The Challenges:

My customers faced a number of challenges:

1. Understanding Gifted Equity

This is a niche area.  I spent additional time outlining the fact that lenders have differing policies around scenarios where a property is being sold below market value – also referred to as a concessionary purchase.

I explained how gifted equity could be utilised in securing a mortgage, paying particular focus to lenders who take a logical view around this area.

2. Debt to Income Ratio

My customers had a number of loans, credit cards and a car finance deal.  All quite normal and all in order.  However, lenders have specific policies around how much debt they deem acceptable, comparative to household income.

3. Less than Perfect Credit History

My customers had historic credit issues which would not be acceptable to a computer says no lender.

The Objectives:

My customer’s primary objective was to secure the most cost-effective and suitable mortgage terms available across the whole of the market.  They wanted to successfully purchase the property with a clear understanding of the financial implications.

The Solution:

1. Financial Review: I conducted a thorough review of my customer’s circumstances.
2. Lender Selection and Negotiation: I identified and engaged with lenders who were receptive to gifted equity scenarios and who were prepared to take a human approach to assessment.
3. Structured Financial Planning: I ensured the gifted equity matter had a positive impact on the terms.

The Outcome:

As a result of my advice:

• The parents have been able to help their son onto the property ladder.
• My customers are able to buy their first home.
• We secured a mortgage rate that acknowledged the gifted equity, offering more attractive terms and the lowest monthly repayments available across the whole of the market.
• My customer’s previous credit issues were appropriately addressed and did not hinder the mortgage approval process.

Conclusion:

This case illustrates the effectiveness of expert guidance in navigating complex mortgage scenarios.

My customers benefited from a tailored approach that not only met their immediate needs but set a solid foundation for their financial future in homeownership.

If you are seeking to understand more about how you can benefit from similar mortgage strategies, or need expert advice on your property purchase options, please do get in touch.