BMV Mortgages, Buying Below Market Value

What is a BMV mortgage?

A BMV mortgage is a residential or buy to let mortgage on a property bought for less than its market value, and what the discount is worth to you depends on why the price is low and on the lender's rules. For an ordinary purchase from a stranger, lenders that publish a basis lend on the lower of the purchase price and their own valuation, so a bargain price does not on its own raise the loan or replace the deposit. The exception is a genuine concessionary purchase, where the seller knowingly passes part of the value to the buyer: a relative selling to a family member, a landlord selling to a sitting tenant or, at a few lenders, an employer selling to an employee. Many lenders, though not all, will then work out the loan-to-value (LTV) on the valuation and count the discount, often called gifted equity, towards the deposit, while capping the loan at the discounted price. A Right to Buy discount in England works in a similar way but falls under each lender's separate Right to Buy rules, covered below.

There is no single BMV rule. Lenders differ on which sellers they accept, whether they use the valuation or the price, the maximum LTV, whether you must add cash of your own and how soon you can remortgage. The mortgage is still assessed in the normal way for affordability, credit and the property, and a mortgage to an individual on a home that they or a close relative will live in is normally a regulated mortgage contract (Regulated Activities Order, article 61).

Concessionary purchases and gifted equity

A concessionary purchase is a sale at a knowingly reduced price to someone the seller has a connection with, and the discount is treated as a gift of equity from the seller to the buyer. The usual forms are:

• Family sales: a parent, grandparent or other relative sells to a family member. Which relatives count varies by lender: some include aunts, uncles, nieces, nephews and first cousins, others only immediate family.
• Landlord to sitting tenant: a private landlord sells to the tenant who lives there. Some lenders want a minimum tenancy, for example at least one year.
• Other connections: a few lenders also accept an employer selling to an employee, a former partner or a friend; others accept family sales only.

Right to Buy is different: a council tenant in England buys at a statutory discount, which lenders assess under their own Right to Buy rules, set out below, rather than as gifted equity.

A discount that stays with the property for later buyers, such as a First Homes or other discount market sale home in England, is not gifted equity: the discount is a condition attached to the home, not equity you own, and lenders assess it under their rules for that scheme.

Lenders that accept a concessionary purchase generally want the discount to be an unconditional gift, not a loan, with no repayment, clawback or retained interest, confirmed in writing, for example by a seller's declaration or a solicitor's letter. Some count the discount as the whole deposit. Others still ask for a cash deposit from your own resources, or only recognise a discount above a minimum size, and a few do not accept family sales at all. Our concessionary purchase mortgages page covers the paperwork in more detail, and family help mortgages compares a family sale with the other ways relatives can help.

How named lenders differ

Published criteria show how far lenders differ on the same discounted purchase. The table below summarises each lender's own intermediary criteria, checked on 29 September 2026: Nationwide, Virgin Money, Atom bank, HSBC UK and, for buy to let, The Mortgage Works, Nationwide's buy to let brand. Each is one lender's published rule and can change at any time. The examples are not a list of the lenders Mortgage Lane uses, and they do not show whether any lender would accept a particular application.

Illustrative example: how the lender's basis changes the deposit

The same family discount can mean a very different deposit depending on whether the lender works from the valuation or the price. Illustrative figures only, not a product or an offer: a home valued by the lender at £200,000 is sold by a parent to their child for £160,000, a discount of £40,000 (20% of the value). A lender that uses the valuation, with a 90% maximum LTV and the loan capped at the price, lends up to £160,000 and needs no cash deposit, although fees and purchase costs still need paying. A lender that works on the price paid, with the same 90% maximum, lends up to £144,000, leaving £16,000 for the buyer to find. With a small discount, such as a £190,000 price, the 90% maximum on the valuation becomes the limit and the buyer still needs £10,000 of their own.

Right to Buy discounts in England

Right to Buy lets an eligible council tenant in England buy their home at a discount, and lenders treat the discount under their own Right to Buy rules rather than as a family gift. GOV.UK says you can apply if the home is your only or main home, it is self-contained, you are a secure tenant and you have had a public sector landlord for 3 years, not necessarily in a row (GOV.UK Right to Buy). For applications made after 21 November 2024, the maximum discount is the lower of 70% of the value and a regional maximum of between £16,000 and £38,000 (GOV.UK Right to Buy discounts).

Lenders that accept Right to Buy commonly lend up to the discounted price with the LTV measured against market value, so the discount works like a deposit. Each lender sets its own cap against market value: published caps checked in September 2026 ranged from 75% to 95%, and some lenders do not lend on Right to Buy at all. If you sell within five years you repay some or all of the discount, all of it in the first year falling to 20% in the fifth, with the amount worked out on the value of your home when you sell it, and for 10 years you must first offer the home to your former landlord or another social landlord (GOV.UK selling your Right to Buy home). Both show in the landlord's offer and on the title, which the lender's solicitor reviews.

Right to Buy has ended in Wales (from 26 January 2019) and in Scotland (from 1 August 2016). Changes to the English scheme announced in April 2026 (GOV.UK announcement) are proposals that need new legislation and are not yet in force, so check the rules that apply when you apply. More on Right to Buy mortgages and in our Right to Buy mortgage guide.

The lender's valuation and the solicitor's checks

The lender's own valuation sets the value it lends against, not the agreed price or the discount the seller describes. The lender instructs its valuer, who reports the market value of the property. If the valuation comes in below the value you expected, the discount the lender recognises, and so the loan, can be smaller, and you may need more cash of your own. Whether the discount is a genuine gift is a separate question, answered by the written evidence the lender asks for, such as a seller's declaration or a solicitor's letter, and by the solicitors' checks rather than by the valuer. A price reduced because the home has Japanese knotweed is covered on our Japanese knotweed mortgages page.

In England and Wales the conveyancing solicitor acting for the lender works to the UK Finance Mortgage Lenders' Handbook, which covers reporting the price, any discount or incentive, whether any of the balance of the price is coming from somewhere other than your own money, and whether the seller has owned the property for less than six months, with each lender's own instructions setting what must be reported and what it then does. Scotland has its own version of the Handbook.

Everything about the price must be disclosed to the lender. Recording a price different from the one actually paid, an undisclosed cashback or incentive, or a private arrangement to repay a discount described as a gift can amount to mortgage fraud, and a lender can decline the application or withdraw its offer if it finds out.

Back to back and sub-sale purchases

A back to back purchase is one where the seller is buying the property and selling it on to you at the same time or very soon after; a sub-sale is one where the seller passes their purchase on to you. Many lenders will not lend where the seller has owned the property for less than six months, and a lender that does may use the lower of the seller's purchase price and the valuation. This is a rule about the seller's ownership, separate from any rule about how soon you can remortgage after you buy.

The seller's side: solvency and moving out

Some lenders ask for a declaration that the seller is solvent, insolvency indemnity insurance, or separate solicitors for buyer and seller. The reason is insolvency law: in England and Wales a trustee in bankruptcy can apply to the court to set aside a transaction at an undervalue made in the five years before the bankruptcy petition or application. Within two years of the bankruptcy no proof of insolvency is needed; for years two to five the trustee must show the seller was insolvent at the time or became so because of the sale, and for a sale to a relative that is presumed unless shown otherwise. A declaration of solvency made at the time of the sale is evidence against that presumption, which is why some lenders ask for one or for indemnity insurance (Insolvency Act 1986, section 339 and section 341). Scotland has its own rules on challenging gifts in bankruptcy (gratuitous alienations). Separately, lenders that say whether the seller can stay on generally require the seller to move out on completion, or decline where a dependent relative will stay.

Buy to let and discounted purchases

Buy to let lenders are generally stricter about discounted purchases than residential lenders. Fewer buy to let lenders accept a family discount as the deposit, several refuse family sales, and some limit the size of any discount: The Mortgage Works, for example, will not consider a property bought for more than 10% below market value, except from a recognised developer where the discount can be evidenced (criteria checked 29 September 2026). A discounted purchase should not be relied on to reach a high LTV on a buy to let; our buy to let mortgage guide explains how rent and structure affect what a landlord can borrow.

If a close relative will live in the property, it is not a standard buy to let. A mortgage to an individual where the borrower or a close relative (a spouse, civil partner or partner, parent, brother, sister, child, grandparent or grandchild) will live in at least 40% of the property is normally a regulated mortgage contract, and many buy to let lenders will not lend on a family let. Lenders that accept a family sale also usually require the seller to move out, so a sale to a child with the parent staying on as a tenant rarely fits either route.

Buying with bridging, then refinancing

A bridge-to-term plan buys the property with a short-term bridging loan and repays it with a mortgage, and the mortgage is a new application that should be checked before the bridge is taken. It can suit a purchase that has to complete faster than a mortgage allows, a property that needs work first, or a discount that a mortgage lender would not recognise at purchase. The exit lender applies its own rules on how long you must have owned the property, which value it will use and the product's maximum LTV, and some lenders use the price you paid rather than the new valuation for an early refinance. Some lenders offer combined bridge-to-term products, and some accept a remortgage that repays bridging finance as an exception to their usual ownership period; others require a full application and underwrite at the term stage. Our bridge to let mortgage page and the bridging guide's section on exit strategies cover planning the refinance.

Illustration, hypothetical figures, not a quote: an investor buys a property valued at £200,000 for £160,000 with a bridging loan of £170,000 gross (85% of the value, about 106% of the price, including rolled-up interest and fees). If the buy to let lender refinancing within six months uses the £160,000 price at an assumed 75% LTV, it lends at most £120,000, leaving £50,000 of the bridge to repay from other money; if it uses the £200,000 valuation at 75%, it lends up to £150,000, leaving £20,000. Rent and product rules would still apply.

Bridging lenders set their own limits on a below market value purchase, separate from mortgage limits, usually as a gross figure that includes rolled-up interest. In Mortgage Lane's experience of the bridging market, some bridging lenders lend up to 90% of the valuation but cap the loan at 90% of the price, while others lend up to 85% of open market value with no cap at the price, which on a large genuine discount can be more than 100% of the price. A formula that combines a percentage of the price with a lower percentage of the value, which you may see quoted for BMV deals, is a rule at some bridging lenders, not a general term mortgage rule. Our bridging loans page covers bridging for below market value purchases.

Remortgaging soon after buying

How soon you can remortgage after buying, and at what value, is set by each lender, and six months is a common starting point rather than a rule of law. Many lenders want you to have owned the property for at least six months before they will remortgage it, some want twelve months, and some will consider it sooner. Where a lender does remortgage early, many lend on the lower of the price you paid and the current valuation unless you can evidence improvement works that justify a higher figure. Some lenders make exceptions, for example for inherited property or for repaying a bridging loan.

Two published examples, checked 29 September 2026, show the range. Atom bank requires the applicants to have owned and occupied the property for at least six months before a residential remortgage. Virgin Money allows a remortgage within six months of buying or inheriting, using the lower of the original price (or the estate valuation, if inherited) and the current valuation unless the property has been significantly improved, but it does not allow a remortgage within six months of being gifted a property.

This matters most where you bought a bargain from a stranger: the purchase lender is likely to have lent on the price, and a higher valuation often only becomes usable once the new lender's ownership period has passed. The new valuation also has to support the figure you expect.

Tax on a discounted sale

A sale below market value can have tax consequences for both the seller and the buyer, so each should take independent tax advice before the price is agreed. HMRC guidance says that for capital gains tax, market value rather than the price received is used where an asset is sold for less than it is worth to help the buyer, although reliefs may apply, such as Private Residence Relief on the seller's own home (GOV.UK capital gains tax: market value and tax when you sell your home). For inheritance tax, a gift can include money lost by selling something for less than it is worth, and no tax is due on gifts if the giver lives for 7 years after giving them, unless the gift is part of a trust (GOV.UK inheritance tax: gifts). Stamp Duty Land Tax in England and Northern Ireland, Land Transaction Tax in Wales or Land and Buildings Transaction Tax in Scotland also needs checking for the way the purchase is documented. Mortgage Lane does not provide tax advice.

How a BMV mortgage is arranged

A discounted purchase should start with the lender: its rules decide how the sale must be documented, so they are checked before the price is agreed and the solicitors draw up the contract.

1. Confirm the discount and the relationship: who is selling, why the price is reduced, whether the discount is an unconditional gift and whether the seller will move out.
2. Tax advice: buyer and seller each take independent tax advice before the price is agreed.
3. Match the lender: which lenders accept that seller and purchase type, whether they use the valuation or the price, their maximum LTV, any cash deposit or minimum discount they require and, for buy to let, whether they accept a discounted purchase at all.
4. Valuation: the lender's valuer reports the market value. If it is lower than expected, the loan and the deposit are worked out again.
5. Legal work: the solicitors report the true price, the discount and the seller's ownership history to the lender, with any gift declaration, solvency declaration, indemnity insurance or separate representation the lender requires.
6. Plan the next step: if you are bridging first or expect to remortgage soon, check the exit lender's ownership and valuation rules before you commit.

If you are buying from family, from your landlord or at a discount, get in touch with the price, the value you expect and how you know the seller. We check the lenders' current criteria for your case before you commit; the lender makes the final decision.