Right to Buy Mortgage Advice

Citrus Mortgages are Right to Buy mortgage specialists. The following is a brief introduction to how Right to Buy works.

The Right to Buy scheme was first introduced in the 1980’s by Margaret Thatcher, the scheme has allowed council house tenants in England that have been paying rent, to buy their properties at a discounted rate.  In order to take advantage of the scheme Council tenants would need to be living in the property for at least three years, is a council tenant or was a council tenant when the house sold to the current landlord. The property is the only or main home and it is self-contained which means that tenants do not live in sheltered housing, or housing for the elderly and disabled. Tenants of a flat or maisonette are able buy on a ‘lease’. This is normally for a maximum of 125 years but it can be for a shorter period.

Once the landlord has agreed to sell the property, the tenant will need to find a mortgage to cover the cost of buying the property and for the general costs associated with purchasing a property including Stamp Duty, Solicitors fees and Land Registry fees. Whilst the application is going through, the Council will only carry out essential repairs to the property. On completion of the sale of the property the tenant will be responsible for all of the repairs and upkeep.

The exact amount of discount will depend on the market value of the property and the length of time the tenant has been paying rental. The current maximum discount is 70% and the discount is currently capped at £103,900 in London and £77,900 for the rest of England. For every additional year the tenant has rented the property, they will qualify for an extra 1% discount or 2% if they live in a flat.

For example, a tenant living in a house which has been valued at £170,000 with a tenancy history of 20 years would qualify for the following discount;
Qualifying % = 35% + 15 x 1% = 50%
£170,000 x 50% = £85,000.
In this case, the maximum discount of £77,900 is applied, so the house would be offered for sale at £92,100.

In most cases, the mortgage lender will treat the discount as a deposit. Certain lenders will allow additional borrowing for home improvements. Only those names on the Right to Buy paperwork can be on the mortgage.

The tenant can sell the property at any time, however if this is within five years of the purchase date they will be asked to repay a proportion of the percentage discount they had originally received.

Lenders will assess the eligibility to obtain finance on many factors; earnings, credit score, age, outgoings, number of dependents etc.

It is highly recommended that you seek professional advice from experts in this area.  Citrus Mortgages offer a friendly, no advice fee service in plain English.

Further information on the Right to Buy scheme can be found at www.gov.uk.