Right to Buy Scheme | A Guide To Buying Your Rented Property

We previously published an article titled Right to Buy | Bluestone Launching New Right To Buy Products. Today, we offer more content on Right to Buy with “A Guide To Buying Your Rented Property.”

The government’s Right to Buy initiative allows individuals to purchase their rented council house at a reduced rate. Recent updates indicate an upcoming scheme extension for Housing Association tenants. This guide provides insights into the program, eligibility criteria, application procedures, and essential considerations. Stay informed and navigate the process smoothly with this invaluable resource.

What is right to buy?

The Right to Buy program, a government initiative, offers the opportunity to purchase your home at a discounted rate if you are currently renting from the council or a participating housing association. Specialised mortgages tailored for Right to Buy make this process more accessible, and in certain instances, there may be options where a traditional deposit is not required. However, it’s essential to note that while a deposit might not be necessary, other upfront fees could be associated with securing a Right to Buy mortgage.

Who qualifies for the Right to Buy scheme?

To meet the eligibility criteria, you must:

Reside in a property rented from the council or a participating housing association, and this property must be your primary residence.
Have a rental history with the council or a housing association for at least three years, which does not necessarily have to be consecutive.
Have no outstanding debts with the relevant council or housing association.
Hold a secure tenancy, indicating a lifetime tenancy where eviction can only occur with legal justification.
Ensure that the property you intend to purchase is self-contained, with all its facilities, including a bathroom or kitchen, and not shared.

Additionally, the maximum discount you can avail yourself of through the Right to Buy scheme is limited.

Right to Buy Scheme | Getting a Right to Buy mortgage

Securing a right-to-buy mortgage can be done through a standard residential mortgage, but some lenders specialise in offering specific right-to-buy mortgage products. These specialised mortgages frequently require lower deposits than standard residential mortgages, and in certain instances, lenders may even cover the full discount price of the property.

While right-to-buy mortgages may offer relative affordability, it’s crucial to remember that additional costs come into play when purchasing your first home. Ensure you consider these associated costs to accurately gauge whether you can afford to buy a home through the Right to Buy scheme.

Right to Buy Scheme | Costs of Right to Buy

The expenses associated with the Right to Buy process involve various costs and fees, similar to any property purchase. Potential borrowers contemplating the Right to Buy scheme should take into account the following fees:

Mortgage deposit (if applicable)
Mortgage fees
Survey costs
Valuation expenses
Conveyancing fees
Potential renovations
Stamp duty
Home Insurance

It’s essential to note that this list could not outline additional costs. To gain a comprehensive understanding of the financial commitments involved, you should communicate with your lender for a clearer breakdown of the expenses you may incur throughout the Right to Buy process.

Right to Buy Scheme | Selling a Right to Buy Property

When selling a Right to Buy property, there are specific considerations regarding the repayment of the discount and the process involved:

If you sell within the first year, the repayment is 100% of the discount.
Second year: 80%
Third year: 60%
Fourth year: 40%
Fifth year: 20%

Suppose you sell your property within 10 years of acquisition. In that case, you must initially offer it to your previous landlord or another social landlord in the vicinity, allowing them to purchase it at market value. This process is known as “right of first refusal.” If they decline, you can sell it on the open market, similar to any other property.

After the initial 10-year period, you can sell it on the open market without restrictions.

Right to Buy Scheme | Right to Buy joint application

A joint application for a Right to Buy mortgage is possible with specific individuals. For instance, you can apply jointly if someone else is on your tenancy agreement. Moreover, you can apply with your spouse, husband, wife, or civil partner, even without living together in the council-rented property.

Additionally, you may apply jointly with up to three family members. These family members must have lived in your home for at least 12 months. They should have made it their primary residence. Importantly, they don’t need to be on the tenancy agreement.

Right to Buy Scheme | Repaying a Right to Buy discount

When repaying a Right to Buy discount, the amount is determined by the property’s open market value at the time of sale. Consider the following scenario:

The property value at purchase is £150,000, with a Right to Buy discount of £75,000 (50% of the property price).

If you decide to sell within five years of purchase, the repayment is based on the current market value. For example, if the current market value is £200,000, you would repay 50% of this value. This amounts to £100,000 when selling the property.

However, the repayment calculation changes depending on the selling timeline. The percentage of the discount to be repaid decreases each year. Using the earlier example:

Selling within one year: Repay 100% of 50% of £200,000, which equals £100,000. Selling four years after purchase: Repay 40% of 50% of £200,000, which is £40,000.

Before finalising the property commitment, consult with your local council or housing association. This will help you accurately understand the expected repayment.

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