Right to Buy: An Expert Guide

The Right to Buy scheme offers council tenants the opportunity to purchase their homes at a discounted rate. The scheme can be an excellent way to step onto the property ladder, although it's essential to understand the mortgage process, potential benefits, and drawbacks.

What is the Right to Buy Scheme?

Introduced over 40 years ago, the Right to Buy scheme allows eligible council tenants to buy their homes with a discount. This scheme is available in England and partially in Northern Ireland but has been abolished in Scotland (2016) and Wales (2019). Most buyers use a mortgage to fund their purchase.

What is the Right to Buy Discount?

The discount depends on how long you've been a council tenant, the type of property (house or flat), and your location. For example, as of April 2024, the maximum discount is £102,400 outside London and £136,400 within London.

• Council House: The discount starts at 35% if you've been a tenant for 3-5 years, increasing by 1% each year after that, capped at 70%.

• Council Flat: The discount starts at 50%, increasing by 2% per additional year of tenancy, with the same 70% cap.

Your discount may be reduced if your landlord has invested in your home in the last 10-15 years, depending on when it was acquired.

Right to Buy Eligibility Criteria

To qualify for the Right to Buy scheme, the following criteria must be met:

• The property must be your primary residence.

• You must have a secure tenancy.

• You’ve been a public sector tenant for at least three years.

• No legal issues like County Court Judgments or bankruptcy.

Certain properties, such as those used for sheltered housing or owned by the armed forces, may be exempt. Additionally, if you rent from a housing association, you may qualify for a similar scheme called Right to Acquire.

How to Apply for the Scheme and Get a Mortgage

1. Work out the costs: Understand the total cost, including ongoing maintenance.

2. Complete an application: Submit a Right to Buy application form (RTB1 notice) to your landlord.

3. Wait for a response: Landlords must reply within 4 weeks for acceptance or rejection. Offers must be provided within 8-12 weeks.

4. Mortgage arrangements: Work with a broker to find the best mortgage deal tailored for Right to Buy.

5. Gather documents: Ensure all relevant paperwork, including proof of income and eligibility, is in order.

6. Arrange mortgage and surveys: Secure your mortgage and start the conveyancing process, including necessary surveys.

Mortgage Eligibility Criteria

Aside from meeting the Right to Buy eligibility, you'll also need to pass standard mortgage checks. These include affordability, deposit size, age, employment status, and credit history. Some lenders will accept the Right to Buy discount as a deposit, providing more favorable loan-to-value (LTV) terms.

Advantages and Disadvantages of Right to Buy

Advantages:

• Discount: Significantly reduces the cost of purchasing your home.

• Security: You can remain in your current home as the owner.

• Personalisation: You gain the freedom to renovate and make improvements.

Disadvantages:

• Eligibility restrictions: Not all tenants qualify.

• Long process: Delays can occur in securing approval and the mortgage.

• Repayment of discount: If you sell within five years, you must repay a portion of the discount.

• Financial responsibility: You’ll be responsible for all maintenance costs.

Which Lenders Offer Right to Buy Mortgages?

Many high street lenders, including NatWest, Barclays, Halifax, and Skipton Building Society, offer Right to Buy mortgages. Terms vary, Mortgage One is an expert at navigating the options.

Typical Interest Rates

As with standard mortgages, Right to Buy mortgage rates fluctuate depending on your circumstances. Recent rates include:

• Nationwide: 4.64% (5-year fixed, 90% LTV)

• Suffolk Building Society: 4.99% (2-year discounted, 80% LTV)

• Barclays: 5.71% (10-year fixed, 80% LTV)

It’s important to regularly check rates as they change frequently.

Selling Your Right to Buy Home

You can sell your Right to Buy home at any time, but if you do so within five years, you will need to repay a percentage of the discount received. This repayment is calculated on a sliding scale:

• 1st year: 100% repayment

• 2nd year: 80% repayment

• 3rd year: 60% repayment

• 4th year: 40% repayment

• 5th year: 20% repayment

Additionally, if you sell within 10 years, you must offer the property to your local authority or another social landlord before putting it on the open market.

Can You Remortgage a Right to Buy Property?

Yes, remortgaging a Right to Buy property is possible. However, approval from your local authority may be required if you plan to borrow more than the original discounted price. The process is generally the same as a standard remortgage, but certain conditions may apply.

Right to Buy Mortgages and Bad Credit

If you have bad credit, obtaining a Right to Buy mortgage can be challenging, but not impossible. Many lenders are cautious when it comes to poor credit history, but specialist lenders exist who may consider your application. A mortgage broker can help identify lenders who cater to individuals with adverse credit histories.

How Mortgage One Can Help

Mortgage One can assist with all aspects of securing a Right to Buy mortgage. We work with brokers experienced in Right to Buy schemes who can guide you through the process, find the best deals, and ensure your application is successful.