A right-to-buy mortgage is for people who want to buy their council or housing association home that they have been renting.
What is 'Right To Buy'
Right to buy is a government-backed scheme that allows tenants of council or housing association properties that have been renting for a minimum of three years the ability to purchase their home at a discount price. After three years as a council or housing association tenant, you can apply for the right to buy via the government website and fill out some forms, starting the process. The maximum discount you can get in England is £84,200 and £112,300 if you live in London.
The longer you have been a tenant, the more discount you will receive; however, after three years of a tenancy, the minimum discount is 35% of the full market value of your home. An example would be as follows; let's assume you've been a council tenant in Mansfield for three years and your home's current full market value is £100,000. This means that if you're eligible for the right to buy discount when you apply to your local authority, you will get a 35% reduction from £100,000, which means you could buy your £100,000 value home for £65,000.
The amount of discount you are eligible for increases by 1% per year after five years of tenancy up to a maximum of 70% (or the cap of £84,200, whichever is the lower). So if you had been a council tenant for say ten years, your total discount might look something like this - 35% for the first three years and then 1% per year for years 5 to 10, which would mean you had a total discount of 40%
Things to remember!
What is a 'Right To Buy Mortgage?
There are no such things as a right to buy a mortgage in its own right, but there are mortgage lenders that allow you to purchase your council home taking into account the legalities around buying from your public sector landlord. As long as you meet all the relevant lending & affordability criteria, you have access to broadly the same mortgage ranges as everyone else. However, mortgage lenders may impose specific conditions in some circumstances.
Can I use the right to buy discount as my deposit?
Several mortgage lenders will allow you to use the right to buy discount you receive from the right to by scheme as the deposit, meaning that you can buy your council home without having to put your deposit down. However, some lenders require you to have some form of deposit, such as 5%.
Can I borrow additional money when I apply for my mortgage?
You can borrow more than the discount purchase price when you make your application in some circumstances. However, the only reason you can borrow more money is for home improvements, and not all lenders allow this as part of their lending policy around the right to buy. As an example of what may be possible, let's assume you are buying your council home, and you have a discount of 40%, and the value of your home is £100,000.
Specific lenders would allow the following - you could use the 40% discount as the deposit and ordinarily borrow £60,000 to purchase your home, but you think that you'd like to renovate the kitchen and bathroom. You know that this will cost you £15,000 to do. As long as we have quotes showing this, then some mortgage lenders will allow you to borrow £75,000 (£60,000 for the purchase and the additional £15000 for the renovation works) at the same time.
If you're thinking about applying for the right to buy, the first place to start is by talking to us to make sure that you'll be able to get the mortgage you'll need. Once we have confirmed you are eligible for a mortgage, we can help you with the right to buy the application and talk you through the full process, along with helping to explain the legal side and making sure that your paperwork is filled in correctly to prevent time-wasting and unnecessary delays to your homeownership.
Right to Buy isn't as straight forward as a normal home purchase but don't let that put you off
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Lewis Shaw (FCA registration number 927754) trading as Shaw Financial Services is an appointed representative of King Mortgages Ltd which is authorised & regulated by the Financial Conduct Authority, FCA registration number 803561.
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Some forms of Buy To Let mortgages are not regulated by the Financial Conduct Authority. The guidance &/or advice contained in this website is subject to the UK regulatory regime and is therefore restricted to consumers in the UK. As with all insurance policies, conditions & exclusions will apply.
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