Right to Buy
mortgages

Eligible public sector (i.e. council) tenants could potentially buy their home at a discounted purchase price in England.

You receive a bigger discount if

• you live in London compared to elsewhere in England;
• you have been a public sector tenant for many years;
• you live in a flat rather than a house.

If you live in a house, you’ll get a 35% discount after you’ve been a public sector tenant for three years. This discount will remain until you have had five years of public sector tenancy.

After five years, the discount goes up by 1% for every extra year up to a maximum of 70% or £84,200 in England and £112,300 in London boroughs, whichever is lower.

In case of a flat, you’ll get a 50% discount after you’ve been a public sector tenant for three years. This discount will remain until you have had five years of public sector tenancy.

After five years, the discount goes up by 2% for every extra year up to a maximum of 70% or £84,200 in England and £112,300 in London boroughs, whichever is lower.

The actual figures mentioned above (maximum £84,200 in England and £112,300 in London) are valid during the tax year of Apr 2020 – Mar 2021 and increase every year.

If you are interested in buying your home, first you will need to contact your landlord (the council). They will work with you to establish the value of the property, the discount you are eligible for and the purchase price.

As a Right to Buy mortgage broker, we can assess your borrowing potential to confirm whether you can afford to buy your home, what the best Right to Buy mortgage deal is for you and then arrange the mortgage on your behalf.

Finally, just like with any purchase, you will also need a solicitor, who will take care of the legal side of the transaction and work with you, the Right to Buy mortgage broker, your landlord and the mortgage lender to finalise the purchase.

You may have a Preserved Right to Buy if you were a secure council tenant when the council transferred the property ownership to another landlord, for example, a housing association.

It’s important to note that most housing association tenants do not have the Right to Buy. You only qualify for Preserved Right to Buy if the council transferred ownership of the property to the housing association while you were already a council tenant.

Preserved Right to Buy can also apply if you later moved to another property owned by the same landlord who took over the original one from the council. But it is not applicable if you move to a property owned by a different landlord, e.g. a different housing association or council.

Your landlord will be able to confirm whether you have the Preserved Right to Buy and. If you do, then you can buy your home in the same way as if you were still a council tenant.

If you are not eligible for Preserved Right to Buy, you may still be able to use the Right to Acquire scheme. Your landlord will be able to confirm it.

This scheme has similar eligibility criteria to Right to Buy, but it also requires

• the subject property to be built or bought by a housing association after 31 March 1997 (and funded through a social housing grant provided by the Housing Corporation or local council) or
• transferred from a local council to a housing association after 31 March 1997

and

• your landlord is registered with the Regulator of Social Housing.

The discount amount during the 2020/2021 tax year is £9,000 to £16,000 dependent on the area within England and is independent of whether the property is a flat or a house.

There are a few requirements that you will have to meet before you become eligible:

• be a council or housing association tenant for at least 3 years;
• use the subject property as your only or main home;
• you don’t have outstanding credit problems, i.e. you are not an undischarged bankrupt, don’t have a bankruptcy petition pending against you, don’t have an unsettled Individual Voluntary Arrangement (IVA) or debt relief order (DRO). Past settled/discharged credit issues can be accepted subject to Right to Buy mortgage lending criteria;
• you don’t have a possession order against you for some debt;
• the subject property is not due to be demolished.

After you meet these criteria, the only question remaining will be whether you can afford the purchase and get a suitable Right to Buy mortgage. This is where we come in.

We assess your Right to Buy mortgage options based on your circumstances and advise you as most appropriate. If you can get the required mortgage and would like to proceed, then we can also arrange it for you to make sure that you get the best Right to Buy mortgage deal.

Lenders consider the discount that you receive as equity you will have in the property. Because of this, some lenders don’t require any additional deposit from you and are happy to lend 100% of the discounted purchase price.

Some lenders can even lend a bit of extra on top of the discounted purchase price to cover your purchase-related costs (e.g. Stamp Duty Land Tax, solicitor fees) or even the cost of refurbishment.

Other lenders would still like to see that you put down 5-10% deposit from your savings and/or from a family gift.

As a whole of market independent broker firm, we have access to all the lenders who can offer 100% of the discounted purchase as well as those who require some deposit. With our help, you can be sure that you are getting the best Right to Buy mortgage deal.

If you sell the property within the first five years after buying it, then you will have to repay some or all of the discount you received as follows:

• If you sell within the first year of purchase – the whole discount amount will have to be repaid
• 2nd year – four-fifths of the discount amount is payable
• 3rd year – three-fifth of the discount amount is payable
• 4th year – two-fifth of the discount amount is payable
• 5th year – one-fifth of the discount amount is payable

If you sell the property within the first ten years, you will have to offer it to either your former landlord or to another social landlord in your area at full market value. If your offer has not been accepted within eight weeks, you will be free to sell the property on the open market.

During the pre-emption period, you are not supposed to rent out the property.

However, councils, housing associations and lenders all understand that “life happens” and you may meet a new partner, move in with them and would like to rent out your former home instead of selling it. Or you may get a new job somewhere far, and it won’t be practical for you to commute from the subject property or sell it and repay part of the discount amount.

In case of a genuine situation, you may receive a consent to let from both the council (or housing association) and the mortgage lender. The approval will make letting out the property legal, as you won’t be breaking your Right to Buy purchase and your Right to Buy mortgage contract terms.

At the same time, during the initial five years, mortgage lenders don’t normally accept remortgaging requests from residential to Buy to Let deals. In other words, if your circumstances change and you’d like to let the property out, but you can’t get a consent to let, you will find it difficult to remortgage onto a deal that allows you to rent out the property.

You will, however, be able to remortgage onto a Buy to Let mortgage deal after the five year pre-emption period.

Building insurance

If you buy a house, then building insurance will be mandatory to ensure that in case the structure is damaged (e.g. by fire, flood or movement), the insurance will cover at least the mortgage amount.

Nothing else is compulsory, but of course, it makes sense to cover costly unexpected events.

Contents insurance

Contents insurance can pay for replacing your personal belongings if someone burgles your home, there is fire, you accidentally drop your new flat screen TV…and the list goes on.

Landlord insurance

If you’re planning to rent out your property then you should consider getting landlord insurance. Landlord insurance protects you as a landlord from risks associated with your rental property. It usually includes buildings and contents insurance, but can also include rental-property specific covers such as protection against loss of rent, and tenant default. It can also cover legal fees and compensation for damage or injury to the tenant due to the property.

Life insurance

Life insurance is a one-off payment if you were to die during the mortgage term, so the insurance can settle your mortgage. This would allow your family to stay in the property without worrying about mortgage payments at an already stressful time.

Critical illness cover

Critical illness cover would give you a lump-sum if you had a serious illness like cancer, heart attack or stroke as well as dozens of other conditions. This payment may or may not settle the mortgage, but it can help pay for treatment, let you take time off work while recovering or alter your home, if necessary.

Income protection

Income protection is designed to give you a monthly income for some time in case you can’t work due to an accident or a long term illness. This covers mental health issues as well.

Of course, all the insurances come with terms and conditions, optional features and your medical history can influence your options.

To find the right insurance cover that fits within your budget, speak to our team today. We can compare the whole market, find the most suitable cover and apply on your behalf free of charge.