The Right to Buy was introduced by the Housing Act 1980 and gives local authority tenants in England the Right to Buy their homes at significantly discounted prices. There are different rules for Wales, Scotland and Northern Ireland.
You are eligible to participate in the Right to Buy scheme if the home you are renting is your main residence, it forms a self-contained dwelling unit, and you have been a public sector tenant (of the council, a housing association, or an NHS trust) for three years.
In a posting dated the 6th of May 2020, the Money Saving Expert also explained the government’s decision to trial rolling out the scheme to housing association tenants, too. It pointed out that there are approximately 2.5million housing association tenants in England, 1.3million of who have lived in those homes for at least three years and who may now qualify for the Right to Buy.
What is a Right to Buy mortgage, and how does it work?
Just as the term suggests, a Right to Buy mortgage is a loan, secured against the property, to help individuals participate in the Right to Buy scheme by buying the council house or housing association dwelling in which they live.
Given the discounts available on the market value of your home, it is certainly worth considering such a purchase – and the longer you have been a council or housing association tenant, the bigger the discount available.
Across the whole of England, at the time of writing, the maximum discount is currently £84,200, explains the Government website, and in London, it may go up to as much as £112,300. The discount will increase each year in April in line with the consumer price index (CPI).
If you qualify for the scheme, have been a public sector tenant for at least three years (these three years do not have to be consecutive), and want to buy your house, you receive a 35% discount. If you have been a tenant for longer than five years, you get a further 1% discount for every extra year up to the maximum national level of £84,200 or £112,300 in London.
If you want to buy the council or housing association flat you have lived in for three years, your immediate discount on the market price is 50% – and that increases by 2% a year for every year past five years, up to the maximum discounts available nationally or in London.
Will I qualify for a Right to Buy mortgage?
As with any mortgage, your eligibility and qualification will depend on a whole host of factors – including your income, expenses, financial status (to determine mortgage affordability), and your credit rating, for example.
In the case of a Right to Buy mortgage, of course, you must meet the scheme’s basic requirement of having been a public sector tenant for at least three years. Any mortgage lender is also likely to expect evidence of your having reliably maintained an arrears-free council or housing association tenancy for at least the previous 12 months.
The property needs to be your sole place of residence and not one that you share with other households.
Can I get a Right to Buy mortgage with no deposit?
Not all mortgage lenders offer Right to Buy mortgages, those that do may have different terms and conditions, and you may find it difficult tracking down a suitable lender.
It may be worth consulting a mortgage adviser since there are lenders prepared to accept the discount for which you qualify as a Right to Buy participant as sufficient mortgage deposit on the house or flat you want to buy.
What is the maximum I borrow on a Right to Buy mortgage?
Your success in buying your home, of course, rests not only on the question of a deposit but also the amount you can borrow by way of a mortgage.
That amount will depend on a whole host of different factors – such as the job you do, your age, the income you earn, the number of dependents you support, and the level of borrowing or credit to which you are already committed.
If you – or your spouse or partner – are in receipt of benefits, these may also be taken into account as a supplementary source of income.
You might also want to consider supporting your mortgage application by arranging a guarantor – a close family member, who owns their own home and is of good financial standing – to guarantee your monthly mortgage repayments if you default.
Can I buy any council house with a Right to Buy mortgage?
The Right to Buy scheme only lets you buy the house or flat in which you currently live – you don’t get to choose to live in any council or housing association property.
Can I get a Right to Buy mortgage if I have bad credit?
Anyone applying for any type of mortgage is going to find the whole process more straightforward and stand a greater chance of success if they have a healthy credit score.
Don’t worry too much if that is not the case. Although you are likely to find it more difficult, some lenders are willing to advance mortgages to those with poor credit records – because, for example, you might have been on the receiving end of:
- an adverse credit overview;
- have previously fallen into mortgage arrears or defaulted on the repayment of debts;
- had a County Court Judgment (CCJ) against you;
- entered a Debt Management Plan (DMP);
- made an Individual Voluntary Arrangement (IVA); or
- declared bankruptcy.
Do I need a Right to Buy mortgage broker?
A professional mortgage broker who has experience of the whole of the mortgage market can help you identify those mortgage lenders most likely to entertain your application favourably.
With the help of a mortgage broker, for example, you might more readily identify those lenders prepared to accept your Right to Buy discount as a deposit, those most likely to advance the size of mortgage you need, and those offering the most competitive mortgage rates based on the mortgage affordability.
A mortgage broker may also help with some of the other common issues associated with mortgage applications, such as:
- maximising your income to improve your mortgage affordability;
- ensuring that your income from various sources (bonuses, overtime, and allowances, for example) are taken into consideration by the lender; or
- your poor credit rating.
Can family members get Right to Buy mortgages?
The short answer is yes. The Money Advice Service, for example, confirms that you can apply for a Right to Buy mortgage with someone else who shares the tenancy with you (they are formally named on the tenancy agreement, in other words) or with as many as three members of your family if you have all lived together in the same home for at least the last 12 months. So, you have the option of buying your parents’ home.
Although you do not have the right to buy any armed forces housing in which you might be living, the period during which you are living in that category of accommodation counts towards your required minimum of three years in public sector housing if you subsequently want to exercise a right to buy.
Given the attractive discounts available, you might want to consider buying the council or housing association home in which you live. Right to Buy mortgages are readily available – even if your credit score is less than perfect – and subject to similar mortgage affordability tests as those faced by