What is Right to Buy?
What is Right to Buy?
Right to Buy is a government scheme, introduced in 1980, that allows council and housing association tenants to purchase their home at a discount.
Assuming you meet the eligibility criteria and have lived in the public sector for 3 years you could purchase your council home through the Right to Buy scheme.
Speak to us today and we can advise on the right path for you.
How we can help
How do I apply for Right to Buy?
To apply for the Right to Buy, you need to fill in ah RTB1 form. You’ll need:
- The address of the property you wish to purchase
- The name of your landlord
- The names of anyone listed on your tenancy agreement
- The names of anyone who wants to share the Right to Buy – They must be a relative, spouse or civil partner and have lived in the property as their main home for at least the 12 months. Spouses or civil partners do not need to be residents for 12 months to share the Right to Buy.
- Details of previous tenancies
- Details of any other properties you have bought at a discount through Government schemes, e.g. Right to Acquire or other Right to Buy properties
- Details of home improvements you have made that have increased the value, this is so you don’t get charged twice in the valuation of your property
- Signature of tenants in your property
Once sent to your landlord, your landlord has 4 weeks to give you their decision. This increased to 8 weeks if they’ve been your landlord for under 3 years. If your landlord refuses to sell the property, they must explain why.
If your landlord agrees to sell the property to you, you should receive an offer within:
- 8 weeks – for freehold property
- 12 weeks – for leasehold property
You then have 12 weeks to accept the offer. This is the point where you should look towards applying for a mortgage.
If you’re thinking about applying for a Right to Buy mortgage, get in touch with one of our specialist advisors to help with the process.
How do I get a Right to Buy mortgage?
Going through a mortgage broker gives you the best chance of finding a mortgage product best suited to your personal finances.
You’ll know how much you want to borrow based on the offer presented by your landlord, from there one of our broker will need to take some information.
- Income – you can prove this with payslips or by using your bank statements. Lenders will need to know you can afford to meet repayments, and our brokers will want to make sure they find you a mortgage that’s affordable.
- Outgoings – this will be things like your general living costs, bills, loan or credit repayments and any other regular expenditures. It’s important to be honest so you are sure you’re getting a mortgage you can afford to keep up the repayments on.
- Your credit report – this is how lenders determine if you’re a responsible borrower and can play a part in whether your application would be accepted. If you have bad credit or a history of credit issues, we could still help you. Our brokers are specialists in bad credit situations and work with specialist lenders who consider all applicants.
- ID – this could be your passport or driving license
- Address details
- Information about your property
- The sum you wish to borrow and the term you’d like to borrow it over
Our brokers will be able to start the application process for you, finding the right lender for your situation. If accepted, you should get a mortgage in principal and from there you can go down the formal application process.
Once your application has been accepted by your lender, your solicitor will arrange for all searches and conveyancing.
Finally, your solicitor will arrange for the funds to be transferred and contracts to be exchanged on the day of completion.
Case study
Helping one customer buy her council home through the Right-to-Buy scheme
Our customer Ms L wanted to buy her council home, but she had bad credit and wasn’t sure if she could do it.
With Clever Mortgages she was able to:
- Use the Right-to-Buy scheme to buy her council home
- Benefit from the council’s £62,000 discount on the property
- Take out a mortgage with a term of 15 years
- Secure an initial 5 year fixed rate
| Balance | Payment | Rate | Term | |
|---|---|---|---|---|
| New mortgage | £41,200 | £307.65 | 4.14% | 15 years |
New Mortgage
| Balance | £41,200 |
| Payment | £307.65 |
| Rate | 4.14% |
| Term | 15 Years |
Ms L had lived in her council house for several years and wanted the reassurance of it being her permanent home. She had missed previous payments though on unsecured debts, which had affected her credit score, and she didn’t think she’d be able to take out a mortgage.
Her local authority had offered a £62,000 discount on the price of the property, which meant she only needed a mortgage of less than half its market value. She approached us as she was keen to find out if she could take out a mortgage and not miss out on such a good discount.
At Clever Mortgages we were able to help as we know the lenders that will accept customers with bad credit. Plus, we secured the customer a 5 year fixed monthly payment.
Ms L was delighted to secure her home at a large discount under the Right-to-Buy scheme.
Frequently asked questions
Who’s eligible for Right to Buy?
The Right to Buy scheme has some criteria that must be met for you to be eligible. This includes:
- The council home you wish to purchase must be your only, or main home.
- It’s self-contained. This means you don’t share any rooms with people who don’t live in your household, this includes bathrooms and kitchens.
- You must be a secure tenant. Gov.uk considers this as a tenant with a contract with their landlord wherein you can “normally live in the property for the rest of your life, as long as you do not break the conditions of the tenancy.”
- You’ve had a public sector landlord, such as your local council, housing association or NHS trust for 3 years, the 3 years do not have to be consecutive.
If your council has transferred your home to a housing association, you could still have a ‘preserved’ right to buy. You can also still apply if you’re not a council tenant now, but were one when your home was transferred to a new landlord
If you want to apply for a Right to Buy mortgage you must not:
- Have debts which have associated legal problems, such as bankruptcy
- Have a possession order against your home
- Live in a property which is due to be demolished
Do I need a deposit for a Right to Buy mortgage?
Some lenders allow you to use the discount you get through the Right to Buy scheme as your full deposit, essentially meaning you could borrow the sum you need for the mortgage without saving for a deposit. This usually comes with the condition that the lender would repossess the entire property if repayments aren’t made following attempts to reclaim owed money.
This isn’t always the case though, so if this is the type of mortgage you are seeking it could be easiest to find through a mortgage broker like Clever Mortgages. Clever Mortgages brokers have access to a range of lenders, several specialising in unique financial situations which means you could have a wider range of mortgage products to choose from.
What other fees come with a mortgage?
You’d still need to pay the other associated fees that come with getting a mortgage, such as: (already been checked by compliance)
- Mortgage Booking – not always chargeable and sometimes known as an application fee, this is charged by the mortgage lender and covers the cost of ‘booking’ your loan product while your mortgage application is processed by the company loaning you the money. An upfront fee, can be free to usual maximum of £200.
- Mortgage Arrangement – not always chargeable, this is the fee the company lending you money will charge you to set up the mortgage. This is likely to start around £500 but varies significantly
- Mortgage Valuation – before a company lends you a mortgage to remortgage your current property or buy a property, they’ll usually want to be sure they’re happy to provide a mortgage for the property (based on its current state) and decide how much they think it’s worth before offering a sum. They’ll have been given an estate valuation but need to check for themselves how much the property is worth. This fee pays for your lender to survey the property. Lender sometimes offer special ‘deals’ with free basic valuations. Lending companies can allow you to upgrade the mortgage valuation that your lender carries out to a homebuyer’s report, which looks at the property in a bit more depth. If your lender is happy to do this, you could save some money. You can opt for a full structural survey; you would need to instruct this yourself with a surveyor and the lender would still carry out a basic valuation.
An upfront fee, starting around £300 (some lenders include this for free). - Survey – A full structural survey is optional but strongly advised. A survey tells you if there are any structural problems or hidden problems with the property that could affect its value and your decision to buy. These usually start at around £400, but could be more dependent on the type you choose. Please see the point on mortgage valuation as lenders may allow you to upgrade the mortgage valuation to cover this.
- Legal fees – If purchasing a property, you will need to pay for a conveyancing solicitor to do the legal paperwork. Conveyancing solicitors specialise in residential property. They will liaise with the seller’s solicitor, mortgage lender and Land Registry to arrange your contract. If you are arranging a remortgage on your current property, the lender may instruct a solicitor and cover the costs. If they don’t you will need to instruct one. For a purchase, legal fees are likely to start at around £1000-£1500. For a remortgage, it can be free to around £350
- Stamp Duty – if you’re a first-time buyer, you don’t need to pay stamp duty if the property’s value is below £300,000. If you aren’t a first-time buyer, it’s mandatory to pay stamp duty tax to the Government when you buy a property in the UK which has a value over £125,000. See more on stamp duty. The amount of tax you pay depends on the property value.
- Land Registry – the Land Registry charges a fee to register the property in your name on the title deeds. Your solicitor should arrange this for you and the include the cost within your legal fees. This tool can help you work out how much you’ll need to pay but it’s likely to start at £200-£500.
Do I need good credit to be eligible for Right to Buy?
We understand people’s circumstances are different and just how easy it is for unsecured debts to mount. It’s still possible to qualify for a right to buy mortgage though even if you have bad credit, for example have missed previous payments or defaulted on a loan.
At Clever Mortgages, we can provide all the advice you need to help you buy your council home, even if you have a poor credit rating. We can help you find a suitable right to buy mortgage that you’ll be able to afford now and in the future.
This means that you could still own your home with the right to buy scheme even if:
- You have a less than average credit history
- You’re self-employed or have complex income
- Your property was built using a non-standard construction method
Helpful information
How does Right to Buy work?
One of the most attractive features of Right to Buy for many tenants is the discount you could get on the purchase of your home. If you’re eligible for Right to Buy, you could get a maximum discount of £84,200, unless you live in London where the maximum discount increases to £112,300. The discount increases each year in April, rising in line with the consumer price index (CPI). This applies to England. Wales, Scotland and Northern Ireland may differ.
How does the discount work?
To work out your potential discount, you’ll need to look at:
- How long you’ve lived in public housing
- What type of property you’re wanting to buy, the discount differs with flats and houses
- The value of your home, the discount you get will be a percentage of your properties value
- Whether your landlord has spend money on your home
If the property you live in and wish to buy is a house, you could get a 35% discount if you’ve lived in the public sector for 3-5 years. Once you’ve lived in the public sector for 5 years, the discount increases 1% for every year you’ve continued to live in the public sector, capped at 70% or £84,200 for most of England and £112,300 for London.
If the property you live in and wish to buy is a flat, you could get a 50% discount if you’ve lived in the public sector for 3-5 years. After 5 years, this increases by 2% for each year you’ve continued to live in the public sector. As with the discount for houses, this is capped at 70% or £84,200 for most of England and £112,300 for London.
What if my landlord has spent money on my home?
If your landlord has spent money building or maintaining your home, this could mean your discount will be reduced. If your landlord has spent more money on your home than it is now worth, you won’t get any discount. Your discount will be less if your landlord has spent money on your home and:
- In the past 10 years – if your landlord built or gained your home before 2 April 2012
- In the past 15 years – if your landlord gained your home after 2 April 2012 or if your buying through a Preserved Right to Buy
What if I sell my home?
There are some rules around selling a property bought through Right to Buy. If you want to sell your home within 10 years of when you purchased it, you first have to offer it to either your old landlord or another social landlord within your area. You can still sell your home at it’s full market price – so long as you and the landlord agree.
If you can’t come to an agreement on the market price of your property, a district valuer will settle this and conduct a free valuation to decide the price. If the landlord doesn’t agree to buy within 8 weeks, you can then sell your home to whoever you chose.
If you sell your home within 5 years of purchasing it through the Right to Buy scheme, you’ll probably have to pay back a portion of the discount you received.
If you sell your home within the first year of purchasing it, you’ll have to pay back 100% of the discount. The amount repaid also depends on the value of the property when sold. From the first year, the percentage of the discount you’d be expected to repay reduces:
- 80% in the second year
- 60% in the third year
- 40% in the fourth year
- 20% in the fifth year
Example found – You bought your home worth £100,000 and got a 40% discount (£40,000). You then sold your home after 18 months for £120,000.
40% of £120,000 is £48,000. As you’re in the second year, you would repay 80% of £48,000 (£38,400).
Preserved Right to Buy
If you were a secure council tenant, living in your property when it was transferred to another landlord – like the housing association – you might have a Preserved Right to Buy. The Preserved Right to Buy can also apply if you move into another property owned by the new landlord, but not if you move into a property owned by someone else.
If you have the Preserved Right to Buy, you could purchase your home through the Right to Buy scheme as usual applicants would.
