Right to Buy
Right to Buy was a policy introduced in the early 1980s by the Conservative government led by the late Margaret Thatcher. The Right to Buy scheme was derived to allow council housing tenants the opportunity to own their home.
This scheme allows council tenants in England and Wales who have a minimum of 3 years tenancy the opportunity for homeownership and to purchase their council property. The council will apply a discount on the purchase price to make the purchase more accessible. The discount amount achieved is dependent on the time you have lived in the property and the maximum discount amount varies depending on which region you reside in. You will need to contact your council to apply for the right to buy and they will let you know what the discount amount will be.
Right to buy mortgage
A right to buy is available to tenants even if they do not have a cash deposit. From a mortgage perspective the lender will want to know the market value of the property you are purchasing as well as the discounted purchase price. The mortgage itself will be based on the market value, which means the mortgage amount you borrow could be 100% of the purchase price. This allows tenants to purchase the property without any cash injection.
For example:
- Market value of the property – £200,000
- Council discount available – £70,000
- Discounted purchase price – £130,000
The mortgage borrowing can be £130,000 against the £200,000 market value. Some lenders may allow for a slightly higher borrowing, for example if some refurbishments need to be carried out.
Benefits of a right to buy:
- 100% of the purchase price can be raise on the mortgage
- Any impaired credit on your file can be considered
- Freehold and leasehold accepted.
- First time buyers accepted.
Process
The first step would be to contact a specialist broker such as UK Property Finance. We would briefly discuss your requirements to understand the details of the property you are purchasing including the price and then look at the affordability and ensure you meet other criteria. To check your right to buy eligibility you will need to contact the council, however the broker will have a look at the mortgage eligibility and check what products are available.
Once you have applied for the right to buy with the council, it can around 4 to 6 weeks for them to review the documentation. They will then instruct a surveyor to value the property, and the council will then provide you with a formal right to buy offer.
Right to Buy — FAQ
Am I eligible for RTB?
There is an eligibility quiz on the official government Right to Buy portal. Check that out and answer a few simple questions to determine whether you may be eligible for an enormous discount on your home’s current market value.
Housing Association Tenants: Recent changes have affected eligibility for the Right to Buy scheme for occupants of housing association properties. Find out more and determine how much you could save by purchasing your home through Right to Buy.
UK Property Finance has extensive experience and expertise in all aspects of Right to Buy applications for council and housing association tenants alike.
How long does the Right to Buy process take?
Upon receipt of your application to purchase your property under the Right to Buy, your landlord is typically obliged to reply with a decision within four weeks. This is sometimes increased to eight weeks, depending on your length of residency in the property. A complete offer notification including the value of the property, the discount you are eligible for and the resulting purchase price for your home will be sent within no more than 8 weeks for a house, or 12 weeks for a leasehold property.
Do you need a deposit for Right to Buy?
Not necessarily, as many lenders accept the discount on the property’s value as the deposit. Depending on the lender, you may therefore not need to provide any deposit. The right to buy discount can possibly be used, however the deposit you need to pay will be determined entirely by the size and nature of the mortgage you need.
How much discount can I receive under Right to Buy?
Up to a maximum of 70% of the property value. The discount amount varies depending on the length of your tenancy and your area.
Do you pay stamp duty on Right to Buy?
Yes, a right to buy purchase is treated the same way as a standard property purchase when it comes to stamp duty