Right to buy mortgages

About Martin Alexander

Martin has been a mortgage advisor for over 15 years. Check to see if you qualify by filling out our quick form or give us a call on 0800 195 0490. mortgage reviews

Lending criteria for a right to buy mortgage is currently more flexible since its introduction. Previously it was difficult for applicants especially if they had bad credit or had only been self-employed for a short time. Applicants who previously struggled to qualify for a right to buy mortgage are now regularly approved.

Right to buy mortgages with adverse credit

  • Credit issues in the last 12 months
  • CCJs
  • Defaults
  • Debt management plans
  • Late payments
  • Many other bad credit issues

Self-employed right to buy mortgages

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

What is the right to buy scheme?

The right to buy scheme is one of a number of government schemes available to council tenants in England. There are separate schemes available for council tenants for Scotland, Wales 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 sometimes help to buy can have great perks too. Right to buy applicants are usually able to purchase their home at a reduced price. Applicants can sometimes even purchase their property with little or no deposit.

In previous years, local authorities were restricted to how much discount they could provide to right to buy borrowers. Currently, local authorities 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 a 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 a continuous three years. You also don’t need to have lived in the same property for three years. As long as you’ve rented 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 in maximising the discount you’re eligible for. The discount on right to buy properties usually depends on certain factors, such as how long you’ve been renting the council property for, the location of the property and of course the actual value of the property. You can visit the official government website for their right to buy calculator which will give you an approximate idea of the discount you’re likely to get.

Selling your right to buy property

There are no restrictions on when you can and can’t sell a right to buy property. However, if you sell the 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 right to buy property for, 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 place 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.

Can I add additional buyers?

You can add additional buyers under the right circumstances. Additional buyers need to have lived with you for at least one year or be a joint tenant with you displayed on your tenancy agreement. You can add up to three family members, however they must have been living with you for at least one year and won’t need to be on the tenancy.

How much can I borrow with a right to buy mortgage?

One of the major advantages 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. On some occasions, it’s even possible to borrow further 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.

Right to buy mortgage with bad credit

It is possible to obtain a right to buy mortgage even with bad credit. If you have severe and recent credit issues then in all honesty you may struggle. The reason being is that the majority of specialist adverse credit lenders don’t offer right to buy mortgages. As each and every case is different, you can speak to an expert mortgage advisor to see if you’re eligible. Your credit may not be as bad as you think.

Further reading: Bad credit mortgages explained.