Here we look at the Right to Buy scheme and everything you need to know from Right to Buy eligibility and getting a Right To Buy mortgage.
What is Right to Buy?
The Right to Buy scheme was intended to give council tenants the opportunity to buy their home at a discount of the full market value.
The scheme (launched in 1980) was intended to boost UK home ownership (to benefit those getting homes at a discount) and remove housing stock out from Government ownership.
In recent years the RTB Scheme has been expanded to include some housing association tenants, where those housing associations have taken over ownership of properties from local councils.
Under the current version of the Right to Buy scheme, council tenants are permitted up to a 70% maximum in discount level, off the current purchase price of your council home.
This 70% maximum discount level is also capped at the upper limit of £80,900 in England and £108,000 in London.
What are the RTB Eligibility rules?
As a minimum Right to Buy eligibility, you will need to have been a council tenant for a minimum of 3 years and have lived in your current council owned home for at least 12 months.
If you have moved a couple of times, don’t worry, as the three-year period does not have to be continuous – although, as stated, you do need to have lived in your current home for at least 12 months.
Right to Buy is also available to Joint applicants.
With a Joint RTB purchase you can apply with your partner or up to three family members, provided they have also lived in the property for the past 12 months. This is particularly useful if parents and their adult children want to purchase the family home and keep it in the family.
If you have current debt problems or some historic adverse credit, this may mean that you can’t take advantage of the Right to Buy scheme, so it is always good practice to speak to a mortgage broker, such as ourselves, at the earliest opportunity.
Whilst the vast majority of council houses in England can be purchased through the Right to Buy scheme, there are some restrictions, so it is worth checking your property is eligible before applying.
RTB discount levels
Your Right to Buy discount depends on the type of property you’re buying and how long you’ve been a council tenant.
If you live in a council house and have been a council tenant for at least three years, you can benefit from a 35% Right to Buy discount.
After five years, this discount increases by 1% each year, up to a maximum of 70%, which would be available to those having lived as a council tenant for 40 years or longer.
Buyers who live in a flat or apartment get an initial discount of 50% after three years, which increases by 2% each year after five years.
As with houses, the maximum discount you can get on your council flat or apartment is 70% off the purchase price.
Right to Buy mortgages
If you want to use Right to Buy but only have a small (or zero) deposit, you may still be able to get a Right to Buy mortgage so it pays to speak to an independent whole of market broker such as ourselves.
Buying a Right to Buy property with no deposit is possible because many lenders will accept the discount you get from the scheme, in lieu of a cash deposit.
This is because many lenders – though it should be said not all lenders – will look at the logic in play, that a 35% discount off the purchase price, is a sizeable proportion of equity left in the property over and above any mortgage outstanding. The bigger the amount of equity in a property being mortgaged, the less perceived risk there is for the lender, all other things considered.
How does a Zero Deposit RTB Mortgage Work?
If you’re buying your council house with a RTB discount of 4o%, for example, a lender may offer you a mortgage on the other 60% of the property without requiring a deposit.
This mortgage is given on the condition that should you fail to make your repayments, they can repossess the entire property and with the 40% equity, a lender can sell the property at auction with less risk of making a loss, when compared to properties mortgaged unto 95%, where there is large margin for the disposal costs of selling a property at auction.
*It goes without saying that a property repossession is a very serious financial outcome and that it is a risk if mortgage payments are not maintained. This is why, there are strict affordability checks in todays mortgage market, to restrict people entering into mortgages they cannot afford.
How do I get an RTB Mortgage?
As an independent whole of market broker we can source the entire UK mortgage market to find the best deal for our customers.
There are some targets RTB mortgage products and the deals on offer will vary between lenders at any given time so when you speak to Mortgage Success, we will access the latest mortgage market research on your behalf.
Being a specialist broker of complex and bad credit mortgages we are also able to access some exclusive products that are not available from other brokers.
A RTB mortgage application is subject to the same affordability checks and criteria as other mortgage applicants so this means that your income and expenditure will be assessed and you’ll have to undergo a credit check.
A credit check will flag up any current and past problems with debt, which could disqualify you from buying your house under Right to Buy so it is best practice to obtain your credit file before the application and as your broker, we can give you honest and impartial feedback on your circumstances, should there be some bad credit we need to overcome.
Whilst we can get mortgages for varying bad credit issues, you cannot use the Right to Buy scheme if you have: an un-discharged bankruptcy or a pending bankruptcy petition.
How do I buy my home using RTB?
The first step is to fill out the government’s Right to Buy (RTB1) application form.
You can complete the form online (here).
When filling out this form, you will need to have following details on hand, to complete the application.
- Your property’s full address
- Your landlord’s name
- The details of your tenancy and the full names of everyone on your tenancy agreement.
- The full names of any family members whom you intend to buy the property with.
- Information on any improvements you have made to the property whilst you have been living there.
When you landlord receives the RTB1 form, this will result in the landlord issuing a purchase request offer to you for the sale price, if they have agreed to sell.
If you disagree with the landlord’s valuation, you are entitled to an independent valuation from HM Revenue & Customs, who will decide what it’s worth.
Although it is at this point that you will need to have your mortgage offer in place to proceed with the purchase, bear in mind that there maybe obstacles in getting your mortgage application processed, such as previous bad credit on your credit report.
So it is always best practice to speak to a mortgage broker beforehand, to assess your chances of getting a mortgage, before you proceed and your application comes unstuck further down the line.
Additional RTB Posts & Questions
- Can I purchase my Right to Buy if I have been Bankrupt?
- Can I get a Bad Credit Right to Buy Mortgage?
An initial enquiry with Mortgage Success is free and with no obligation but we can quickly assess your mortgage eligibility and advise you on any obstacles and how we can overcome them to have a success Right to Buy mortgage application.