Discount Market Sale Mortgage (DMS)
The Discount Market Sale (DMS) scheme is an excellent route to homeownership, often described as Shared Ownership without the rent.
The benefit is immediate: you buy 100% of a property at a massive discount (typically 20% to 50%) off the full market value, and you own it entirely from day one. However, securing one of these homes involves two main challenges:
- Rarity: Local authorities and developers offer a very small, limited number of these properties.
- Mortgage Difficulty: The specific rules regarding who you can sell to and the fixed discount are restrictive, meaning DMS mortgages are not standard. You need specialist advice to find a willing lender.
The first challenge: Finding a Discount Market Sale (DMS) property
DMS properties are rare and highly sought after. Unlike open market homes, they are controlled by local councils and housing associations to ensure they go to people with a local connection or specific need.
The eligibility rules are strict; you must usually live or work within the local borough. This is why you need to target your search to specific providers in specific areas.
- 1
Check specialist affordable housing portals
Affordable schemes like DMS and Shared Ownership are primarily listed on dedicated portals, not usually Rightmove or Zoopla.
- Share to Buy: This is the country's leading portal for affordable homeownership, and it has a specific hub for Discount Market Sale properties.
- Homes for Londoners: If you are searching in London, this is the official platform run by the Mayor of London's office.
- 2
Contact local authorities directly
DMS schemes vary by council and often have local names like 'Council Shared Equity' or 'Discounted Open Market Sale'. The property is sold through the council's nominated list, so you must register with them first.
- Find Your Local Council: Use the government's official finder tool.
- Search the Website: Once you find the council, search their housing department website for: Discount Market Sale, Council Shared Equity, or Low-Cost Home Ownership (LCHO).
- Register: Register your interest. They will then nominate you when a property becomes available.
- 3
Look for developments and resales
- Housing Developers: Major developers selling new builds often work with councils to offer a set number of discounted units. Check the "Ways to Buy" sections on new build development websites.
- Estate Agents: DMS properties that are being resold by the current owner may be listed by local estate agents. These resales still have the original restrictions and must be sold at the same percentage discount.
Book a FREE(i) consultation with one of our independent brokers.
- Access to the whole market.
- Not tied down to selling any particular lender's products.
- 100% impartial advice.
- No need for face-to-face meeting.
While you must check your local council, these authorities are known to have operated DMS or similar schemes:
- London Borough of Barnet
- London Borough of Hammersmith & Fulham (Council Shared Equity)
- Wiltshire Council
Key takeaway: DMS is a local, council-led scheme. If your local authority doesn't offer it, you will likely need to move to an area that does, or seek an alternative affordable scheme in your preferred area.
Getting a mortgage for a DMS home
This is the biggest hurdle after you secure a property. DMS homes are considered non-standard by the majority of high street lenders in England and Wales. This significantly limits your choice of mortgage products.
Not all lenders accept the unique legal framework of these homes, meaning the list of suitable products is small. You cannot simply approach your existing bank and expect it to offer a product.
The restriction that worries lenders (Section 106)
The primary reason for the difficulty is the Deed of Restriction (also known as a Section 106 agreement). This is a legal clause registered on the Land Registry title that permanently locks the discount in place. When you sell, the property must be sold at the same percentage discount to another eligible buyer.
This restriction is a problem for lenders because if they had to repossess the property, they would also be restricted to selling it at the discounted price. This reduces their security.
Specialist mortgage requirements
The Section 106 includes a Mortgagee Exclusion Clause to protect the lender's interest, allowing them to sell the property on the open market at the full price if repossession is necessary, and a sale to another registered provider does not proceed using all reasonable endeavours within three months of a local authority being notified by the lender.
This clause is checked by the lender's valuer to ensure it is robust enough to protect their interests sufficiently, immediately ruling out any lender who is not highly experienced in affordable housing schemes. Even if a lender is willing to consider a DMS property, if the clause is insufficient, the valuer will only apply a restricted valuation against the stock.
The deposit and the Loan-to-value (LTV)
A DMS mortgage is secured against the discounted purchase price. For example, if a home is worth £250,000 but the discounted price is £200,000, your deposit and mortgage are calculated on the £200,000 figure.
- Deposit: Typically, you will need a minimum deposit of 5% of the discounted purchase price.
- LTV: The Loan-to-Value ratio is calculated on the discounted price, meaning your monthly payments are significantly lower than a full market value mortgage.
Due to the non-standard legal requirements and the limited pool of willing lenders, using an independent mortgage broker who specialises in DMS and Section 106 restrictions is essential to securing your finance.
DMS eligibility and resale rules
While the greatest challenge is financing (addressed in the section above), you must also meet strict eligibility criteria and understand the permanent restriction governing future resale.
Mandatory Eligibility Criteria
DMS is a social housing scheme designed for low-to middle-income local buyers. To qualify for any DMS property in England and Wales, you must meet the criteria set by the local council.
- Local Connection: You must usually live or work within the specific council's borough for a set period.
- Income Cap: Your total household income must not exceed the limit set by the council (often linked to a percentage of the discounted property price).
- No Other Ownership: You cannot own another property in the UK or abroad when you complete the purchase.
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
