What is a Right to Buy mortgage?
This is a government scheme designed to allow council and housing association tenants in England to buy their homes at a discounted price. A Right to Buy mortgage is a mortgage that interested buyers can take out if they want to use the scheme but don’t have the necessary finance in place to complete their purchase.
How does right to buy work?
Right to buy is to allow those living in public sector housing, such as housing association, local council or other government department, to buy their homes at a discount.
Discount is dependent on the length of time you’ve spent in the house in question, the type of property involved (e.g. a flat or a house) and, of course, the value of the property.
Am I eligible for right to buy?
- If you’ve had a public sector landlord for 3 years (including council, housing association or NHS trust) then you can apply for Right to Buy on a council property. The 3 years do not all have to be in one go, and they do not all have to have been spent in your current property.
- You will also need to be a secure tenant – this means you have been given a long term tenancy (usually after 12 months have passed).
- You will need to be debt free – you can’t buy your property if you are bankrupt, have a bankruptcy petition against you, have made an Individual Voluntary Arrangement to pay back debts, or have obtained a debt relief order.
- You can use Right to Buy with another person, or even multiple people. If you share a tenancy, you can apply together, or if you live with family members, you can club together with up to 3 of them to purchase the property together. They do not have to be on your tenancy. Wider family members or partners need to have lived in the property for at least 12 months to be included
What’s the Right to Buy discount?
Right to Buy discount is how much below the market value you’re able to buy your home for if you’re eligible for the scheme.
Discount will depend on:
- the length of time you’ve been a public sector tenant
- whether you’re buying a house or a flat
- how much your property is worth
- any outlay your landlord has made in recent years, either building or on the maintenance of your home.
The largest discount available at present is £84,600 in England, or £112,800 if you live in London. These amounts rise in line with consumer price index (CPI) inflation every April.
The government Right to Buy mortgage calculator can give you an idea of the discount you might expect, with the type of property you live in, and your time spent as an eligible tenant, both crucial.
Discounts on houses
If you want to buy a house and have been a public sector tenant for three to five years, you could be entitled to a 35% Right to Buy discount. The discount then increases by 1% for each additional year beyond five years you’ve been an eligible tenant, up to a maximum discount of 70% (and subject to the maximum monetary discounts allowed).
Discounts on flats
If you want to purchase a flat, the discount is 50% if you have been a tenant of a public sector landlord for three to five years. For each year longer than five years, this rises by 2% to a maximum of 70% (and in line with the overall discounts permitted).
How do I apply for the Right to Buy scheme?
Before you apply for a Right to Buy mortgage, you should apply for the Right to Buy scheme itself.
If you want to use Right to Buy to purchase your council home, you will need to:
- Complete a Right to Buy application form (known as an RTB1 notice) and send it to your landlord.
- Await your landlord’s decision – this should be within four weeks (or eight weeks if they have been your landlord for under three years). If they say no, reasons must be given for the rejection.
- If they say yes, you should receive an offer within eight weeks of agreeing if your property is freehold, or 12 weeks if it’s leasehold.
The offer will include the price your landlord wants you to pay for the property and your discount. It will also include details of the property and land being bought, including any known problems in relation to these.
If you are buying a flat, the offer will include estimates of any service charges, which might be payable during the first five years of ownership.
Once you have received the offer, you have 12 weeks to decide if you still want to buy. If you don’t reply within this timeframe, you’ll receive a reminder that gives you an additional 28 days to reach a decision. However, you are free to say you don’t wish to proceed and want to carry on renting at any time.
It is possible to challenge an offer if you feel a valuation is too high. You can also appeal an outright rejection to sell to you if this is because your property has been deemed suitable for housing the elderly.
How do I sell my Right to Buy house?
You’ll usually have to repay some or all of the discount if you sell your Right to Buy home within five years of buying it (although this is not generally the case if you transfer ownership to a family member). If you sell your home within 10 years, you must also offer either your old landlord or another social landlord in the area first refusal on the purchase at the full market price, as agreed by you and your lender. You can call in a district valuer for an independent valuation of this.
If after eight weeks, your landlord or another social landlord does not take up your offer, you can sell your home to anyone on the open market.