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Right to Buy Scheme | Your Guide to An Amazing Mortgage Journey

Right to Buy Scheme

Right to Buy Scheme


We previously published an article entitled:  Right to Buy | Bluestone Launching New Right To Buy Products | 2021. Today, we want to give you more content on Right to buy, hence “Your Guide to An Amazing Mortgage Journey.”

The government’s Right to Buy initiative allows individuals to purchase their currently rented council house at a reduced rate. Excitingly, recent updates indicate an upcoming extension of the scheme to Housing Association tenants. This comprehensive 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:

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

Additionally, there are limitations on the maximum discount you can avail through the Right to Buy scheme.

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:

  1. Mortgage deposit (if applicable)
  2. Mortgage fees
  3. Survey costs
  4. Valuation expenses
  5. Conveyancing fees
  6. Potential renovations
  7. Stamp duty
  8. Home Insurance

It’s essential to note that additional costs could not be outlined in this list. 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:

  1. If you sell within the first year, the repayment is 100% of the discount.
  2. Second year: 80%
  3. Third year: 60%
  4. Fourth year: 40%
  5. 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 then 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 any restrictions.

Right to Buy Scheme | Right to Buy joint application

A joint application for a Right to Buy mortgage is permissible, but it must be with specific individuals. You are eligible to make a joint application if anyone else is listed on your tenancy agreement. Additionally, you can make a joint Right to Buy application with your spouse, husband, wife, or civil partner, even if you haven’t resided together in the property you currently rent from the council.

Furthermore, you can make a joint application with up to three family members. To qualify, these family members must have lived in your home for the past 12 months, and it must be their primary residence. Importantly, they are not required 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:

  1. Property Value at Purchase: £150,000 Right to Buy Discount: £75,000 (50% of the property price)

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

However, the repayment calculation becomes more intricate 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, equal to £100,000.
  • Selling four years after purchase: Repay 40% of 50% of £200,000, which is £40,000.

For an accurate understanding of the expected repayment, it is advisable to consult with your local council or housing association before finalising the property commitment.

We’ve come to the end of our publication on “Right to Buy Scheme | Your Guide to An Amazing Mortgage Journey.” Until next time, stay Connect!

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