In the UK, those who live in council properties or certain housing associations have a right to buy the property that they live in. This is officially known as the Right to Buy scheme. It is an ongoing scheme that helps those living in council properties buy their flat at a discounted rate.
What is a Right to Buy Mortgage?
A Right to Buy mortgage is simply a mortgage offer that acknowledges and accepts that there is a Right to Buy discount in place. Everything else is the same as a standard residential mortgage.
You’ll want to look for lenders who offer a Right to Buy mortgage simply because they’ll be familiar with the Right to Buy scheme and know how to value your property properly. It speeds things up when you and your lender are on the same page.
Right to Buy: An Overview
Right to Buy, as stated, is a government scheme designed to help council tenants buy the flats or homes that they live in. Not only do you have a right to stay where you are, but you also get to buy your property at a discount, making it far more accessible for council tenants to get up onto the property ladder.
Who is Eligible for Right to Buy?
You can buy your property through Right to Buy if you are a tenant in a council property. The property must be held by a public sector landlord like your local council, housing association, or NHS trust.
You might rent an ex-council flat, for example, and not be eligible for the scheme. This is because the property is not held by a public sector landlord and is instead on the free market. In short, that property has already been purchased through Right to Buy and cannot be purchased again.
That being said if you live in a council property, but the council then sold that whole property to a housing association, then you can still buy it through Right to Buy. This is officially known as Preserved Right to Buy.
How Does ‘Right to Buy’ Work?
Right to Buy stands out since it lets tenants buy properties they live in at a discount. How much of a discount depends on where the property is.
In London, the maximum discount is £136,400. In the rest of England, it’s £102,400. The amount changes based on the consumer price index. The discount itself depends on the size of the property, its type, and how long you’ve lived in it. For example, a tenant who has lived in a council house for five years or more will get a larger discount than a tenant in a flat who has lived there for only three years.
Note that if you sell your property within five years of buying it through Right to Buy, then you will need to pay back the discount. If you wish to avoid paying the discount back, you must keep it in your possession (and have it as your sole household) for over five years.
How Does a Right to Buy Mortgage Work?
A Right to Buy mortgage covers the remaining principal after the Right to Buy discount is applied. If your council property costs £200,000 on the market, for example, and you get a 25% discount through Right to Buy, then you’ll only need a £150,000 mortgage.
Do you need a deposit for your Right to Buy mortgage?
No, you don’t need a deposit, though it may be worthwhile to provide one anyway. The reason why you don’t need the deposit is because you can use the discount as the deposit instead. This makes it far more accessible for council tenants to buy their homes.
If you do have money saved, however, then you may want to consider adding a deposit on top anyway. This will increase the amount of equity you have in the property and, more importantly, may open up new interest rate options from lenders.
Frequently Asked Questions
I was denied my right to buy; why?
There are many reasons why you may be denied the Right to Buy. You may be denied because you are either bankrupt or about to go bankrupt. You will also be rejected if you have not been a public sector tenant for long enough. If you have been charged with antisocial behaviour, then one of the consequences might be a suspension of your Right to Buy.
You may also be rejected if the property isn’t suitable. For example, if the property is set for demolition, you’ll be rejected. You also cannot buy a sheltered housing property or buy the property if it’s particularly suited for elderly or disabled people, as those properties are low in stock.
Does Right to Buy still exist on new properties?
Yes, though the law was introduced back in the 1980s, it is still in effect today. If you live in a newly built council property, for example, you can still evoke your Right to Buy.
Can I buy a council property with a partner?
This depends. You can buy with more than one person so long as the person has lived with you for a period of 12 months or more. The person must also have been legally added to the tenancy agreement in advance. You cannot buy with an outsider who has not been a tenant with you.
