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Right to Buy Mortgages
‘Right to Buy’ is a government scheme introduced in the 1980s by Margaret Thatcher through the Housing Act 1980, set up to give council tenants the right to buy the council home they are living in, at a significant discount.
The scheme has provided millions of households the opportunity to own their own home, hold a tangible asset and helped local authorities improve their public finances.
This article will provide you with information about the scheme, see if you are eligible and how to get a mortgage.
What is right to buy and how much discount can you receive?
The council will send a valuer round to assess the property’s value and provide you with a price for the property and the discounted value. How much your property is discounted by depends on the type of property, the length of time you have occupied the property and whether or not you have used the Right to Buy scheme in the past. This scheme is only available in England.
Currently the maximum discount across England is capped at £84,200, except London where it is capped at £112,300.
Houses are entitled to 35% discount for public sector tenants who have lived at the property between 3 to 5 years. The discount increases by 1% for every additional year of being a public sector tenant up to a maximum of 70% or the thresholds (capped at £84,200 for England, £112,300 for London), whichever is less.
Flats are entitled to 50% discount for public sector tenants who have lived at the property between 3 to 5 years. The discount increases by 1% for every additional year of being a public sector tenant up to a maximum of 70% or the thresholds (capped at £84,200 for England, £112,300 for London), whichever is less.
Deductions to the discount will be made if the landlord has spent money on maintaining or building the public housing you live in.
Bear in mind that if you sell your home within 5 years of owning it, you may have to pay back all or some of the discount.
What is a right to buy mortgage?
You may need a mortgage to fund the purchase of your council home and this is a similar process to a traditional mortgage and subject to checks as with any other mortgage applicant. Not all lenders offer Right to Buy Mortgages and each lender has different lending criteria’s and requirements but, in some instances, you may be able use the discounted value as a deposit and take out a mortgage on the remainder. Some lender may require for you to save up your own deposit in addition to or instead of the discount.
There might be other factors regarding the property in which lenders would need to consider before making a decision on whether to lend, such as the construction type or number of floors in the building.
For right to buy mortgages, most lenders typically require you to have a good credit history or credit score, income and affordability checks. If you do have factors which you think might affect your ability to get a mortgage such as adverse credit, self-employment, loans and others, a mortgage broker can access an extensive list of lenders and may be able to find you a match.
There are other additional costs associated with the process of buying a property such as legal fees and administration fees which you will need to consider.
Who can apply to buy a council home
• If you are a council tenant and:
• It is your only/main home
• You are a secure tenant (allowed to live at the property for the rest of your life if you keep within the conditions of the tenancy)
• The property is self-contained
• Had a public sector landlord for 3 years at any point
• No legal issues with debt
Ex-council homes which have been sold to a landlord (such as housing association) whilst you were living in it, can still qualify for ‘Preserved Right to Buy’.
If you weren’t living in the property during the time when the council sold the property, you may still be able to purchase through the ‘Voluntary Right to Buy pilot’ scheme.
Joint applications are available with someone you’ve shared tenancy with or up to three family members who aren’t named on the tenancy but have lived with you for the past 12 months.
How to apply
An RTB1 application form needs to be filled and sent to your landlord who should provide you with a response within 4 weeks of receiving your application (or if they have been your landlord for less than 3 years then within 8 weeks).
This will provide you with further information and an offer if the landlord agrees to sell.
The Right to Buy scheme has allowed tenants to become homeowners. If you have read this article and think you qualify for Right to Buy, you may need a mortgage which is a financial commitment that requires careful consideration and you may have further responsibilities that you didn’t have as a tenant. Contact us today if you wish to discuss further whether you can qualify to buy your council home and how to get a mortgage.