Looking to buy your council house or flat? We can help.
Many mortgage lenders will have deals which are specifically designed for those buying a home through the Right to Buy scheme. But finding the best deal, and understanding it, can sometimes be a bit tricky.
We can put you in touch with a mortgage broker who knows about right to buy mortgages and the best places to get one. They will know how the discount scheme works and which lenders will provide 100% mortgages, so you don’t need to worry about the deposit.
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What is the Right to Buy Scheme?
Right to Buy is a housing policy in the United Kingdom that enables eligible council tenants to purchase their homes from the local authority at a discount.
In 1980, Margaret Thatcher’s conservative government passed legislation which allowed over 5m local authority tenants the right to buy their home at a discounted price.
Politically, it was a controversial topic. The Housing Act allowed people to buy their council houses but the Councils were under no obligation to reinvest any of this money back into social housing.
Unsurprisingly, the scheme was a huge hit with council tenants.
In the first five years over 500,000 council homes were sold at a discount.
Right to buy has allowed many lower income households to establish a foothold on the property ladder without having to pay the full price of a property. This opportunity has given them a permanent rent-free home and a valuable asset.
Over 40 years later, the Right to Buy Scheme has received a few changes but is still very much alive and open for business.
Right to Buy has been a contentious policy since its inception, with supporters arguing that it helps tenants to achieve home ownership and opponents criticising it for preventing the construction of new social housing. Right to Buy sales reached their peak in the early 2000s, but have since declined.
Despite this, Right to Buy (RTB) remains an important part of UK housing policy and continues to help thousands of tenants each year to realise their dream of homeownership. Recent changes extended the opportunity to qualifying housing association tenants.
The length of time spent as a tenant determines the level of discount. The discount given can be substantial and reduces the price paid for the property. A wide range of mortgages are available so that working tenants can borrow the money to take advantage of this opportunity.
How much is the Right to Buy discount?
The RTB scheme gives tenants a discount against the market value of their home. Effectively lowering the price of the property for tenants.
The longer you have been a public sector tenant, the more discount you get.
The maximum discounts will increase on 6th April each year in line with the Consumer Price Index (CPI). There is a higher maximum set for properties in London.
The discounts are also different between houses and flats/maisonettes.
MAXIMUM DISCOUNTS
£96,000
OR
£127,900
(APPLIES TO LONDON BOROUGHS)
HOUSES
You will be eligible for a 35% discount after being a tenant for three years.
After five years the discount increases by 1% for each additional year.
The maximum discount is 70%.
FLATS & MAISONETTES
You will be eligible for a 50% discount after being a tenant for three years.
After five years the discount increases by 2% for each additional year.
The maximum discount is 70%.
The maximum discount for either property type is £96,000 or £127,900 in the London Boroughs
If you intend to buy with someone else, you can use whichever qualifying period is the highest between you. So if you have 5 years but your partner has 10 years you can apply for the 10 year discount.
CONTACT A MORTGAGE BROKER
If you are ready to take the next step then we can put you in touch with a fully qualified independent mortgage broker.
Eligibility
The discounts are available after a minimum tenancy period of three years. So you need to have been a public sector tenant for at least this amount of time before you can apply.
The three years don’t need to be continuous but you must have lived in your current home for 12 months or more.
Who has the Right to Buy?
You should have the right to buy if you are a secure tenant of a right to buy landlord or you rent as a public sector tenant (local authority, armed forces, NHS).
The house or flat you wish to buy must be self-contained and your main home, where you have lived for at least one year.
It is possible to make a joint application for Right to Buy and this will make the mortgage affordability easier. If you’re eligible you could buy your home with your parents, another family member, someone else on the tenancy or your spouse or civil partner.
Preserved Right to Buy
You may qualify for the Preserved Right to Buy if you were previously a local authority tenant and you became an assured tenant when ownership of your home was transferred to a registered provider (such as a housing association). You must have been living in your home at the time of the transfer.
With preserved right to buy you will be granted the same discounts as council tenants.
Right to Buy for housing association tenants
Housing association tenants in England could be eligible to buy their home at a discount using the Right to Acquire option. The amount of discount is lower that RTB and differs according to where you live.
The government has made announcements about their intention to extend Right to Buy to housing association tenants. At the time of writing we are still waiting for the details …
Things to consider
Buying your own home is a big decision and there are lots of things to think about before you start the process.
Home ownership can provide you with more freedom and can be a valuable asset for you and your family in years to come.
But owning your own home also means that you will be responsible for it. Although you will no longer pay rent you will need to:
- Pay the mortgage repayments each month
- Have insurance for the property
- Organise and pay for repairs: large or small
- Renew items like the boiler from time to time
You also need to bear in mind the property that you are buying and whether it is suitable for a mortgage company. Some lenders will refuse properties that are:
- in a high rise block
- made of non-traditional construction
- have certain types of external cladding
- in run down estates
For advice and further information about the Right to Buy scheme you should contact your landlord and also an independent mortgage broker.
While brokers will be able to find a mortgage for you, they can also provide some initial advice and guidance before you get going.
THE RIGHT TO BUY PROCESS
These are the next steps needed once you have decided that Right to Buy is suitable for you:
01
Apply for the Right to Buy
The first step is to complete the online application form RTB1.
You will need to have the following information ready:
- Property address
- Landlord’s name
- Full names of people named on your tenancy agreement
- Full names of any family you are buying with
- Current and previous tenancy details
- Details of any improvements you have made
Don’t forget to sign the form.
You can save and continue with the form before completion for up to 30 days but once it is completed you will need to download the printable version within 15 minutes.
02
Send the form to your landlord
When you have completed the form, save and print it out, sign in all the relevant places and take it or send it by recorded delivery to your landlord.
If you take it by hand, ask for a receipt. You should keep a copy of the completed form.
Your landlord is required to process your RTB application within a set time limit. If they don’t meet these timescales or delay without reason, you could get a reduction in the sale price.
03
Landlord response
Your landlord has up to four weeks to confirm your Right to Buy status. This is extended to eight weeks if you have been with your landlord for less than three years.
If your application is successful, your landlord needs to arrange for the property to be valued and then send you the RTB offer. This will include the purchase price for your property and your discount plus a description of the property.
A further eight weeks is allowed for this part of the process.
04
Accept the offer
Once you have received the offer in writing you will have twelve weeks to accept it.
If you still wish to go ahead then you will need to:
Find a solicitor
A solicitor or conveyancer will be needed to deal with the legal aspects, the mortgage and to transfer the property in to your name.
FIND A MORTGAGE
While you are free to approach a mortgage lender yourself, we would always recommend using a mortgage broker. They will be able to help you with the Right to Buy process as well as secure you a great mortgage deal. During the mortgage application stage the lender will arrange for the property to be valued.
COSTS
At this point you will need to start paying for some of the fees and costs, so it’s a good idea to budget ahead for this.
05
Final stages
The final stages of buying any property will depend on the mortgage lender and the solicitor.
Once you apply for your mortgage, your income, employment status, credit profile will all be assessed along with the affordability of the mortgage. When the lender is happy they will send you a mortgage offer. This is the formal letter offering you the mortgage.
The solicitor or conveyancer has many tasks to do, including liaising with the lender and the landlord.
At some point you will be asked to sign the contract to buy your home and then a few weeks later you will ‘complete‘ on the purchase.
Congratulations, you now own your home.
Government
Right to Buy Agent Service
The government’s official Right to Buy Agent service helps council and housing association tenants who are interested in understanding and taking up the Right to Buy their home.
The service offers free and impartial advice on Right to Buy and, if you decide home ownership is the right choice for you, their advisers can also help you through the process of buying your home.
They can help you with:
- finding out if you are eligible
- working out your discount
- guidance about the costs involved
- completing your application form
https://www.ownyourhome.gov.uk/scheme/right-to-buy/
https://www.ownyourhome.gov.uk/scheme/right-to-buy/contact-an-agent/
RIGHT TO BUY MORTGAGES
Most people using their Right to Buy will need a mortgage. There’s no special ‘right to buy’ mortgage scheme but not all lenders offer them and you need to meet the lender’s requirements to be given a mortgage.
Not everyone who qualifies for the Right to Buy will qualify to get a mortgage.
A mortgage lender will first need to see confirmation from your landlord that a Right to Buy has been granted. You can normally use the full discount as your mortgage deposit and you will borrow the rest.
Any lender will need to check your income, your credit history and whether you can afford the mortgage.
Table of Contents
- Mortgage Eligibility
- Applying for a mortgage
- How do Right to Buy mortgages work?
- Will I need a deposit?
- Can I get a 100% mortgage?
- Can I apply for a mortgage with someone else?
- Can I get a mortgage if I am retired?
- Can I get a mortgage if I am self-employed?
- What happens when I sell my home?
- Right to Buy Mortgage Brokers
Mortgage Eligibility
You will need to prove to a mortgage lender that you can afford to buy your home and keep up with the monthly mortgage repayments.
They will be looking at:
- Your employment status (employed/self-employed)
- Your provable income
- Your household and personal spending
- Your credit report
- The type of property
- Your age
- The amount of mortgage needed
While there are some lenders that will accept a small amount of bad credit, you cannot use the RTB scheme if you have:
- A pending or undischarged bankruptcy
- An IVA
- A debt relief order
By using an independent mortgage broker to help you, they can look at all of this information before you need to apply to a mortgage company.
Applying for a mortgage
There’s quite a lot to deal with when applying for a mortgage and if you have not done this before it can seem confusing.
If you use a right to buy mortgage broker to help you then they can make sure you understand your choices and will explain what is happening along the way.
Your mortgage options – As well as the amount of money you want to borrow, you need to decide what type of mortgage you want, over how many years, and what type of interest rate is best. We explain these points a bit further down the page.
Documents needed – There’s quite a lot of information and documents needed by the lender. Your broker will be able to help you but you will probably need:
- Your Right to Buy notice
- ID – Driving licence/passport
- 3-6 months payslips and last P60
- 2-3 years self-employed accounts
- Any other income: inc pensions and annuities
- Last 3 months bank statements where your earnings are shown
- Any planned home improvements
The mortgage application will also ask for details of your solicitor.
At this point you will most likely need to pay some mortgage costs such as:
- Property valuation fee
- Brokers fee
- Mortgage arrangement fee
- Solicitors initial costs
How do Right to Buy mortgages work?
Right to Buy mortgages work in the same way as most other mortgages. Here’s a quick overview:
Repayment method
You will need to decide what repayment method is best for you, this is how you want to pay the mortgage back. Most people will choose a repayment mortgage.
Repayment
With a repayment, or capital & interest, mortgage you slowly repay the amount borrowed (the capital) plus the interest over the mortgage term.
Each month you pay interest and some of the capital off, so the amount you owe gradually reduces.
Interest Only
With an interest-only mortgage the lender is only expecting you to pay the interest amount each month.
The monthly payments are therefore cheaper than the equivalent repayment mortgage. The downside is that the debt does not reduce, so at the end of the term the lender will be asking for all of the money to be repaid.
Interest rates
The interest rate is the percentage of your mortgage balance that the lender charges you each year. This is how the lender makes their money.
There are several different types of interest rate products that lenders offer.
Fixed rates
With a fixed rate mortgage your monthly payments stay the same for a set number of years, even if other interest rates go up (or down).
Variable rates
A variable interest rate is one that can change, usually because the Bank of England has announced a new interest rate. There are a few different types: variable rate, tracker rate, capped rate.
Mortgage term
The mortgage term is the number of years that your mortgage is set up for. When applying for a mortgage the lender asks you how many years you want it for.
If you have a repayment mortgage, changing the mortgage term will affect the monthly payments; the longer the term the lower your repayments.
If you have an interest only mortgage your payments will be unaffected.
Number of years
When it’s their first mortgage, most borrowers will choose a term of 25-30 years as this helps to keep the monthly payments affordable.
Lending into retirement
Depending on your age when you buy your home, it’s possible that the mortgage term finishes later than your retirement age. Not all lenders are happy with this.
Mortgage fees
When you buy a property there are several different types of fees to pay. Some you pay at the beginning and some are due after you complete on your purchase.
Mortgage related
- Product fees
- Arrangement fees
- Valuation fees
- Broker fees
Other
- Solicitors fees
- Legal searches
- Stamp duty
- Insurance
Will I need a deposit?
When you buy a property using a mortgage it is normal for the lender to ask you to pay a cash deposit towards the price. This is usually a minimum of 5-10% of the purchase price.
However, with a Right to Buy the property purchase price is reduced, using the RTB discount. So there are lots of lenders that are happy to take the government discount into consideration and lend you the rest.
This effectively means that you can have a 100% mortgage for the discounted price you need to pay.
As an example:
| Property value | £250,000 |
| Less 40% RTB discount | £100,000 |
| Discounted purchase price | £150,000 |
| 100% mortgage | £150,000 |
| Mortgage deposit | NIL |
How do I qualify for a 100% mortgage?
The level of Right to Buy discount you are eligible for will determine the price of your property. In the example above this would be £150,000.
So how can you get a 100% mortgage for £150,000?
- You will need to have a large enough provable income
- The mortgage must be affordable when looking at your existing commitments
- Your credit history needs to be reasonably good
How much does a £150,000 mortgage cost?
Lenders are happy going up to 100% loan to value (LTV) as long as you have the income and affordability.
If you have no provable income from employment or self-employment you’re unlikely to be able to get a mortgage, no matter how big your RTB discount is.
Can I borrow more than 100%
It is possible to borrow extra money where this will be solely used to improve the property. This again needs to fall within the lenders criteria and pass affordability checks.
Can I ?
apply for a mortgage with someone else?
Other people can join you to help purchase the property.
With regards to the Right to Buy, those eligible would be you, your spouse or partner, anyone else on the tenancy agreement or a family member that has lived with you for the past 12 months.
The lender will be expecting for the people applying for the mortgage to be the same as listed on the RTB paperwork.
However, it is possible for this to be different.
Some lenders will be happy arranging a joint mortgage even though the right to buy is for a single person. This can be set up very similar to a guarantor mortgage or joint mortgage sole proprietor (JMSP).
Can I ?
get a mortgage if I am retired?
It is possible for many people to be granted a mortgage even though they are retired.
Opinion does differ between lenders. But some are happy with borrowers who are retired or who are close to retirement age.
It mainly comes down to your provable income position and how this may or may not change during the term of the mortgage.
The lender must always make sure that the mortgage looks affordable for you.
Can I ?
get a mortgage if I am self-employed?
Being self-employed can sometimes mean that getting a mortgage is a bit long-winded.
Lenders need to see proof of your income and then assess your affordability for the new mortgage. As income for self-employed people, including freelancers and contractors, will vary, providing this proof can be challenging.
We have access to mortgage brokers who are specialists for all types of self-employed mortgages, including those for Right to Buy.
Mortgages are available and lenders can still go up to 100% of the discounted purchase price, subject to proof of income.
Can I ?
get a mortgage on a house which is non-standard construction?
It is common to find ex-council houses that were built using what we now call non-standard construction. This is basically anything which is not brick/block walls and a tiled roof.
Often these were built in the decades following the end of World War Two, where England desperately needed more affordable housing.
There were issues with almost all of these new styles of building, many of them involved precast concrete and/or steel frames. Mortgages for PRC concrete houses and steel frame property mortgages are available from a small number of lenders.
What happens when I sell my home?
You are of course able to sell your home at any point. But if you do this within the first five years then you will have to pay back some of the discount you received.
The amount you need to pay back depends on how long you have owned the property:
- 100% of the discount in the first year
- 80% of the discount in the second year
- 60% of the discount in the third year
- 40% of the discount in the fourth year
- 20% of the discount in the fifth year
IMPORTANT
The amount of discount that needs to be paid back is calculated against the sale value of your property, not the original purchase value.
Right to Buy Mortgage Brokers
If you are a Local Authority tenant and want to take advantage of your Right to Buy then Respect Mortgages can put you in touch with expert mortgage advisers who are experienced with RTB.
These brokers are whole of market, which means they have over 100 mortgage companies to approach to get you a great mortgage deal. Solutions should be available even if you are self-employed or have some bad credit.
They can also help you access mortgages that may not be available by going direct to lenders.
Buying a house is complicated enough but adding in the Right to Buy as well means there’s a lot to deal with. Our brokers can explain the whole process and guide you through each step.
Their service covers all of the UK with all towns and areas included.
Contact a mortgage broker for an initial chat (no obligation).
Ready to explore your options?
If you’re just about to start a new mortgage journey and could use the guiding hand of a professional, don’t hesitate to reach out to a reputable mortgage broker.
An independent mortgage broker can access over 100 lenders on your behalf. They will make the process smoother and more profitable than going it alone.
Keep reading, keep asking questions. The more you know, the better decisions you can make.
