Last Updated on 26th September 2020
Lending criteria for a right to buy mortgage is currently more flexible since its introduction. Approval was previously difficult for applicants especially if they had bad credit or were self-employed for a short time. Applicants who previously struggled to qualify for a right to buy mortgage are now regularly approved.
To speak to an advisor, you can make an enquiry below. We’ll assess your financial situation and get you approved soon after.
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 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 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 don’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 in 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 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 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.
How much can I borrow with 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 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.
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
- Use dividends & salaries
- Many other self-employed scenarios
There are other scenarios which can cause problems when you apply for a mortgage, such as having bad credit. Learn about Right to Buy mortgages with bad credit here.
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 having to juggle lenders on one side and 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. Our advisors can find you the best right to buy rates and make sure your application is sufficient for approval. You can make an enquiry below to get started.