Right To Buy Mortgage
Right to buy is an excellent way to get onto the property ladder without the need to save for a deposit. We have many expert Right to Buy Mortgage Brokers waiting to guide you through the process.
Right to Buy Mortgages
The Right to Buy Scheme is where the secure tenant of a local council or approved housing association, is given the option to purchase the home they live in at a discount to the properties market value
The amount of discount you will be eligible for is dependent on three things.
Where you live
How long you have been a council tenant
Whether you live in a house or a flat.
Right to Buy Discount
- House: 35% discount from the market value of your home, when a tenant for 3-5 years. After which the discount will increase by 1% each year up to a maximum of 70%
- Flat: 50% discount from the market value of your home, when a tenant for 3-5 years. After which the discount will increase by 2% each year up to a maximum of 70%
The full process of the Right to Buy Scheme is listed below. But once you have established the above, it is time to find the right Mortgage. And there are quite a few options to consider.
Right to Buy Mortgages with No Deposit
Obtaining a Right to Buy Mortgage with no deposit is possible in most cases as most Mortgage Lenders will accept this. Including Specialist Lenders in some cases.
Lenders accept that the Right to Buy Scheme is designed to help individuals purchase their home, that otherwise wouldn’t be able to. And those who are unlikely to have the savings required to put toward a deposit.
Therefore, Lenders have created different options to assist potential borrowers on purchasing through Right to Buy.
Here are the different options when obtaining a Mortgage for Right to Buy:
100% of the discounted purchase price – Most lenders will allow you to purchase your Council property without the need of any deposit from yourself.
Borrowing more than the discounted purchase price – Some lenders will allow you to purchase more than the discounted purchase price, to pay for things like Solicitors fees and even home improvements.
Specialist cases – are you self employed or do you have bad credit? We have advisors which specialise in these cases too. So, don’t let these factors put you off purchasing through the Right to Buy scheme.
Right to Buy Mortgage with Bad Credit
Most mainstream Mortgage Lenders as well as some Specialist Mortgage Lenders do lend on the Right to Buy Scheme.
This means if you have Bad Credit, there should be options available to you. However, this will be dependent on the severity.
Generally, if the adverse was light (a default or CCJ) and happened more than 2 years ago, there should be options available to you.
In more recent cases of Bad Credit, there may still be options. But this will be dependent on the type and severity.
Obtain a copy of your Credit Report, and speak to a Mortgage Advisor, which specialises in Right to Buy. They will be able to tell you the options available to you.
Right to Buy Mortgage Lenders
Not all Mortgage Lenders will lend on the Right to Buy Scheme. However, there is still a good range of Lenders that do.
The main Right to Buy Mortgage Lenders are:
Coventry Building Society
Progressive Building Society
Right to Buy Remortgages
When Remortgaging a Right to Buy Property there will be two scenarios.
Remortgaging during the pre-exemption period, within 5 years.
Remortgaging after the pre-exemption period ends, after 5 years.
When Remortgaging your property after the pre-exemption period, most Lenders should be available to you providing they accept ex local authority properties.
Worth noting that Lenders are generally stricter when it comes to ex local authority flats too.
When Remortgaging within 5 years, this is a little bit more restrictive. As explained below.
Right to Buy Remortgage within 5 years
You are free to Remortgage your Right to Buy property. However, if it is within 5 years (during the pre-exemption period), only certain Lenders will accept this. The same as when you purchased the property.
This is due to the pre-exemption period, which is where the council is able to reclaim a portion of the discount should you sell the property or the property need to be repossessed by the Lender.
Some Lenders will also allow you to release capital from your property. The amount you are able to release will usually depend on the length of time you have remaining on the pre exemption period.
What’s the full process of buying through the Right to Buy Scheme
- Apply to your landlord online or by printing out a postal application form right to buy
- The Landlord will contact you within 4-8 weeks to confirm your eligibility
- Right to Buy Offer – your landlord then has 8 to 12 weeks to send you your Offer, which will confirm the estimated market value of your property and the discount you are eligible for. The market value minus your discount is the amount you will need to pay, to purchase your property.
- Obtain a Mortgage – you then have 12 weeks to accept your Landlords offer. During which you will need to speak with a Mortgage Advisor, who will arrange the Mortgage for the amount you require. You will also need to instruct a Solicitor who will complete the purchase for you once you have obtained your Mortgage Offer (link to full Mortgage Process)
- Completion. Congratulations, you are now a homeowner.
What are the advantages of buying through the Right to Buy Scheme
Bonus: The most clear and obvious advantages is being able to buy your home for an unrivaled discount. No other affordable housing scheme provides a bonus or discount as good as Right to Buy.
Creates Homeowners: Right to Buy enables families to become home owners, who often never saw the prospect of owning their own home.
A great family asset: Gives families an asset to hand down to other family members/next of kin.
A great investment: Owning property is usually a stable and safe investment.
Instead of paying rent, you pay off a Mortgage each month, which then increases the amount of the home you own each month as your Mortgage reduces.
What are the disadvantages of buying through the Right to Buy Scheme
Initial cost: In many cases, there will be an initial cost to yourself for buying your home, although some lenders will allow you to release funds to pay for this.
The potential costs of Right to Buy are listed below.
Limited flexibility: If you were planning on moving or relocating in the short term, Right to Buy might not be right for you.
If you want to sell or rent out your property within 5 years for example, some or all of the discount will be repayable.
More responsibility: Being a home owner can be expensive. As a Homeowner you will now be responsible for all the repairs and upkeep of the property, which your Landlord would have been responsible for previously.
Selling your Right to Buy Property
You are free to sell you Right to Buy Property. However, if it is within 5 years from when you completed the purchase, there are a couple of things to consider.
Council may have right of first refusal – if you want to sell your property, you may have to offer this to the Council or Housing Association you bought the property from first.
You will have to repay some or all of the discount – you will have to repay a percentage of the discount if you sell your home within 5 years. If you were to sell within the first year, you would have to repay the whole discount. The amount you have repay then falls each year until you have owned the property for five years.
Potential costs of your Right to Buy Mortgage
- Lenders Arrangement/Product fees – a fee the lender will charge for arranging your Mortgage. In general, the higher the Arrangement fee the lower, the Interest rate. Most, if not all lenders, will also provide a low/no fee option and charge a slightly higher rate as a result. These fees tend to be between 0-£999.
- Broker fees – this will depend on how complex your case is. For example, whether you have any adverse credit. To find out exactly what it could cost, get in touch with one of our Mortgage Brokers for a free non-obligatory quotation. Our Mortgage Brokers operate a fair fee policy and will tell you from the very start what, if any, their costs will be. On average though, you can expect to pay between 0-£495.
- Solicitors fees – for a right to buy purchase, you can expect to pay anywhere between £800 and £1,500, so its important to shop around. Our Mortgage Advisors can again provide you with a quote.
- Stamp Duty – if you are a first time buyer in England, it is unlikely you will pay stamp duty if your propery is valued less than £500,000. For non first time buyers, Stamp duty will be due on properties worth over £125,000.
- Mortgage Valuation – the lender may charge a fee to complete a basic valuation of your property during the application process. This will be between 0-£250. But could be more if you need to use a specialist lender, if you have adverse credit for example.
- Survey fees – you may choose to carry out a more thorough assessment on your property. The most common, being a Homebuyers report, which will cost between £300-£500.
Speak to a Right to Buy Mortgage Broker
Not all Mortgage Advisors will have the specialist knowledge or even deal with Right to Buy Mortgages.
Speak to one of our qualified, regulated and highly rated Right to Buy Mortgage Brokers. Simply complete our short Mortgage Enquiry form and we will get one Mortgage Broker, to give you a call.
They can answer any other questions you have, provide you with a free non-obligatory quote and/or talk you through the process in greater detail.
If you’re self employed or have had credit problems in the past, don’t worry, we can help. As a specialist in these areas, we have access to all Specialist Mortgage Lenders.
All our Mortgage Advisors hold the full CeMap qualification (Certificate of Mortgage Advice & Practice) and are regulated by the Financial Conduct Authority.
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