Last reviewed on 8th October 2023 by Martin Alexander (Mortgage Advisor)
If you’re renting your home from a housing association, you may be eligible to buy it under the Right to Acquire scheme. This can be a great way to buy your first home and transition from a tenant to a homeowner.
Using the scheme will require a Right to Acquire mortgage, which is different from a regular mortgage. Applying for a regular mortgage when you use the Right to Acquire scheme can lead to problems later in your application.
In addition to the scheme, there are several other government mortgage schemes to help first-time buyers. If you’re unsure of what scheme to apply for, make an enquiry, and an advisor will guide you further.
What is a Right to Acquire mortgage?
A Right to Acquire mortgage is a loan used to purchase a home using the scheme. If you intend on buying the home you’re renting, you’ll need to qualify for the scheme before applying for a mortgage.
Mortgages for Right to Acquire are different because they’re assessed differently from regular mortgages. Given the fact that there are discounts involved and you’re buying a home from a housing association, there are more elements to assess.
Perhaps the most important takeaway from this guide is that not every lender accepts applicants using the Right to Acquire scheme. For instance, Metro Bank and Precise are two lenders that don’t accept the scheme, but many others don’t. We’ll explore the lenders that accept the scheme further in this guide.
What is the Right to Acquire scheme?
Right to Acquire is a government scheme that allows housing association tenants to buy the home they’re renting. The main incentive for using the scheme is that you can receive a discount on the value of the property. The discount you’ll get will depend on your location within the UK but will usually vary between £9,000 and £16,000 from the overall price of your home.
Do I qualify for the Right to Acquire scheme?
To qualify for the scheme, you must be a housing association tenant. Furthermore, you must have been a housing association tenant for at least three years. This means that you’ll need a public sector landlord to qualify, such as:
- A housing association
- Local and national trusts
- Armed services
What if I have a private landlord?
If you have a private landlord, you’ll be unable to use the scheme. Other schemes are available, such as Right to Buy, which you may qualify for instead. Your public sector landlord must also be registered with the Regulator of Social Housing. If you’ve been made bankrupt or evicted from a property in the past, you will struggle to qualify.
When you apply, you must fill out a Right to Acquire application form and send it to your housing association. Your housing association will then reply with an offer if they agree that you can buy the property. You’d start looking for a Right to Acquire mortgage at this stage.
Make sure your property is eligible
The home you wish to purchase must also be eligible for the scheme and must be owned by a housing association. Your local council may have also transferred the property to your housing association, making your home eligible.
The home you’re buying must be self-contained and your primary or only residence. If you’re living in a property that isn’t self-contained or is an additional home, it’s likely you won’t be approved for the scheme.
Which mortgage lenders accept Right to Acquire?
This is where it gets tricky. Only some lenders accept Right to Acquire applicants.
- Halifax – Accept the scheme, and may you allow you to use the discount you’re receiving as a deposit for your mortgage.
- Natwest – Will consider applicants but will assess each application case by case.
- Darlington – Only accepts 80% LTV. You’ll need a 20% deposit or a big enough discount to meet their criteria.
- HSBC – Do not accept the Right to Acquire applicants under any circumstances.
It’s crucial to understand that this is just a handful of lenders and their criteria. There are hundreds of lenders that we work alongside who may have better rates at the time of your application. Approaching lenders yourself without the help of an advisor could result in you being declined.
Some lenders will charge you more than others, with fees and rates varying across the market. An advisor can also find lenders that are suited to your circumstances, especially if you have certain issues such as poor credit or a low income.
Will I need a deposit?
You may find it surprising that you can get a Right to Acquire mortgage without a deposit. You’re probably wondering how this works. Well, lenders that accept the discount as part of their criteria use it in place of the deposit.
Not all lenders will allow for this, as it depends on the value of your home, the discount you’re receiving and the lender you’ve applied with. This is why selecting the right lender can save you thousands of pounds before your mortgage starts. On the other hand, you could lose money on wasted applications by applying with a lender that was never suitable from the start.
Is Right to Acquire different from Right to Buy?
Right to Acquire and Right to Buy are two separate schemes. Right to Buy is for council tenants, whereas Right to Acquire is for housing association tenants.
The schemes are similar, as they both allow you to buy the home you’re renting. However, you must apply with the correct scheme before starting a mortgage. If you’re unsure, you can speak to your housing association to check what scheme you’re eligible for.
What should I do next?
While homebuying schemes allow for some great benefits, they can make the mortgage process a little more complicated. This is because additional forms and checks must be filled out before applying for a mortgage. Once you’ve passed the Right to Acquire checks, you’ll need to apply for a mortgage, leading to more applications and checks.
This is just one of the many reasons we’d recommend getting the insight and expertise of an advisor before applying. You can enquire to start your application and get more information about how it works.
About the author
Martin is a senior mortgage advisor and has held a CeMAP qualification for over 15 years while also completing an MBA in Global Banking & Finance.