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Right to buy mortgages

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Right to buy mortgages

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Last reviewed on 5th August 2021

Applying for a Right to Buy mortgage is a lot easier now than its initial introduction in 1980. Approval was previously difficult, especially for applicants that were self-employed or had bad credit.

Those that previously struggled to qualify for a Right to Buy mortgage are now regularly approved.

Key features of Right to Buy mortgages include:

  • Freehold and leasehold
  • Repayment mortgages only
  • Fixed, tracker and discounted rates
  • Terms of up to 40 years
  • No maximum age limits
  • Adverse credit considered

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How to get a Right to Buy mortgage

One major advantage of buying a property through the Right to Buy scheme is that the discount enables tenants to purchase a property with little or no deposit at all.

It’s even possible to borrow more for home improvements. The potential incentives make Right to Buy mortgages an attractive prospect.

Here’s an example.

If you’re eligible for the Right to Buy scheme and the property you wish to purchase is valued at £100k, your local authority may offer you a discount of 25% enabling you to purchase the property for £75k.

You may require some further funds for home improvements which you’ve applied for, so your lender is able to offer you a mortgage of £80k with zero deposit.

To summarise, you’ve purchased your property for £75k, paid no deposit and also have an extra £5k for home improvements.

What is the Right to Buy scheme?

The Right to Buy scheme is one of a number of government mortgage schemes available to council tenants in England. There are separate schemes for council tenants in Scotland and Northern Ireland.

The Right to Buy scheme allows tenants the opportunity to purchase the council property they’ve been living in.

Not only are tenants able to purchase the property, but the scheme offers great perks too. For instance, applicants can usually purchase their home at a reduced price and sometimes with little or no deposit.

In previous years, local councils were restricted to the amount of discount they could provide to Right to Buy borrowers. Currently, local councils are a lot less restricted and are able to offer great discounts, giving tenants even more of an incentive to buy.

Discounts will vary and will largely depend on the valuation and location of the property at the time of applying for a Right to Buy mortgage.

How do I qualify for the Right to Buy scheme?

To qualify for the Right to Buy scheme, you need to have been a tenant for at least three years. Bear in mind that this doesn’t have to be three continuous years. You also won’t need to have lived in the same property for three years.

As long as you’ve rented a council property for at least three years then you’ll qualify for the Right to Buy scheme. The council property you’ve rented must either be from a housing association or local council (public sector landlord).

How to get the most Right to Buy discount

Unfortunately, there isn’t a particular method for maximising the discount you’ll be eligible for.

The discount on a Right to Buy home usually depends on certain factors, such as how long you’ve been renting, the location of the property and of course the actual property value.

You can visit the official government website for their Right to Buy calculator. This will give you an approximate idea of the discount you’re likely to get.

ask a mortgage broker

Can I add additional buyers to a Right to Buy mortgage?

You can add additional buyers to a Right to Buy mortgage under certain circumstances.

Additional buyers that are non-family members need to have lived with you for at least one year or be a joint tenant with you. This also needs to be displayed on your tenancy agreement.

You can add up to three family members to your mortgage. Each member must have been living with you for at least one year and won’t need to be on the tenancy.

Can I apply for a Right to Buy mortgage if I’m self-employed?

Being self-employed can sometimes make it difficult to get a Right to Buy mortgage. That said, it all depends on how long you’ve been self-employed and more importantly the income you’ve declared.

Our advisors can help self-employed applicants in the following situations:

  • New business with minimal account history
  • Use only your latest accounts
  • Using retained profits
  • Apply with dividends & salaries
  • Contractors
  • Many other self-employed scenarios

Read more: Can I get a mortgage if I’m self-employed?

There are other scenarios that can cause problems when you apply for a mortgage, such as having bad credit.

Learn about Right to Buy mortgages with bad credit here.

Selling your Right to Buy property

If you sell your Right to Buy property within five years then you may have to pay back some if not all of the discount. The amount of discount you’ll have to pay back depends on how long you’ve owned the property, which can be seen below:

  • 100% of the discount in the first year
  • 80% of the discount in the second year
  • 60% of the discount in the third year
  • 40% of the discount in the fourth year
  • 20% of the discount in the fifth year

If you sell your Right to Buy home within ten years, then you must initially offer it to your previous landlord or another council landlord.

If your previous landlord doesn’t purchase within 8 weeks, you’ll have the option to sell the property on the open market.

You may not have to pay back the discount if ownership of the property is transferred to a family member. This needs to be first authorised by your landlord and then legally carried out by a qualified solicitor.

Right to Buy mortgage brokers

Getting your Right to Buy mortgage all depends on whether your circumstances meet government criteria. Furthermore, you’ll also have to meet the criteria of your lender.

Applicants are often speaking to lenders in addition to trying to meet the criteria of a Right to Buy mortgage application.

Using a Right to Buy mortgage broker can save you a lot of hassle. Advisors can find you the best Right to Buy mortgage rates and make sure your application is sufficient for approval.

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About the author

Mortgage Advisor | More Articles

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.