Raising Finance

A guide to getting a Right to Buy mortgage
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Getting the best deal on a Right to Buy mortgage

8 Mins

The UK government’s Right to Buy scheme was introduced by the Conservatives in the 1980s, in order to provide qualifying council housing tenants with the opportunity to buy their homes at a discounted price.

Since then, more than two million people (and joint applicants) have successfully purchased properties across England and Wales through the Right to Buy scheme. In this introductory guide, we will take a closer look at how the Right to Buy scheme works and how to ensure you get the best possible deal on your Right to Buy mortgage.

What is Right to Buy?

Right to Buy provides qualifying council housing tenants with the opportunity to purchase the property they live in at a discounted rate. Increased annually to reflect inflation, the maximum discount available as of January 2020 is 70%, up to a maximum of £82,200 in England and Wales or £110,500 in London. 

The size of the discount available is calculated on how long the applicant has lived continuously in a council property. 

The scheme is open to anyone who meets the basic criteria though was introduced primarily for the benefit of first-time buyers and lower income households. 

Who is eligible?

The main requirement under the Right to Buy scheme is a minimum of three years’ tenancy in a council property. This does not necessarily have to be three years of unbroken residency. For example, you could have lived in a council house for two years, followed by two years as a private tenant and a subsequent two years back in council housing.

Current applicant criteria, as outlined by the UK government, are as follows:

  • A minimum of three years’ residency in a council property
  • No mitigating legal issues at the time of your application
  • Residency in a standard council property (not disabled housing or sheltered housing)
  • The property must be the applicant’s primary place of residence
  • The home they wish to purchase must be self-contained

After three years of residency or council property, qualifying tenants may be offered the minimum 35% discount. This then increases over the years to reach the maximum 70%, which can represent an enormous discount on the property’s true market value.

How to apply for a RTB mortgage

If you’re interested in purchasing a property under the Right to Buy scheme, the first thing to do is reach out to an independent broker for advice. Prior to submitting your application, your broker will help you determine whether you are eligible and advise on the size of the discount you can expect.

If your application for a Right to Buy discount is accepted, you then have 12 weeks to decide whether or not to go ahead. If you choose to turn down the discount offered, it could affect your future eligibility for a Right to Buy discount on the same property. 

Right to Buy deposit requirements

One of the most appealing aspects of the Right to Buy scheme is that it can eliminate the requirement of providing a deposit. Major banks and lenders typically require anything from 10% to 20% as an initial down payment.  

Under the Right to Buy scheme, many high street banks and lenders are willing to accept the discount offered on the property in place of a deposit. Terms and conditions will vary from one lender. Using the discount in place of a deposit does not affect the discounted property purchase price – it simply means you do not have to save up for a 10% or 20% down payment.

Financial requirements

There is technically no such thing as a ‘Right to Buy mortgage’, at least in the sense that it is not a separate product and does not attach any unique terms, conditions or eligibility requirements.

A Right to Buy mortgage is the same as any other residential mortgage and brings the same general eligibility requirements into play. You may not be required to pay a penny in the form of a deposit, but you will still be subject to the same general financial checks.

Your lender will want to see evidence that you are in a good financial position and can comfortably meet your repayment obligations long term. This will mean considering your outgoings, your existing debts, proof of income and your financial track record. 

If your credit history isn’t up to scratch, you may still be able to qualify for a ‘subprime’ mortgage or a specialist home loan. Most subprime products are not available from major banks and High Street lenders.

Comparing deals from UK lenders 

Approaching one specific lender with your mortgage application is not advisable. Generic online mortgage comparison sites can be useful though tend to be restricted to a select network of major banks and lenders. Finding the best possible deal on your Right to Buy mortgage means comparing as many deals as possible from major banks and independent lenders across the UK.

Irrespective of whether you have a flawless financial history or a badly blemished credit report, your ideal Right to Buy could be found beyond the High Street. This means considering quality deals and exclusive rates that can only be accessed via an established broker.

Simply contact the team at UK Property Finance anytime and we will conduct a whole-of-market comparison on your behalf. All with no obligation to go ahead and ideal for applicants with an imperfect credit history or difficulties providing proof of income.

An unmissable opportunity

With the UK property market experiencing such ongoing and intensifying turbulence, the future of the Right to Buy scheme is anything but certain. While there are no signs of an immediate withdrawal of the program, there are also no guarantees that it will be around forever. 

It is therefore advisable to consider your options carefully and determine whether now really is the time to claim a huge discount on your property. As a 100% independent mortgage broker, you can count on the experts at UK Property Finance to provide the honest and impartial advice you need to make the right decision.

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