How Does Right to Buy Affect Mortgage Eligibility?

by Jade Hands

The government’s Right to Buy scheme provides qualified council property tenants the opportunity to purchase their homes at a discounted price. Depending on the property type, location and period of residency, discounts as high as £82,800 (increasing to £110,500) are available.

In order to qualify under the Right to Buy scheme there are conditions the applicant must adhere to:

  • The property they wish to purchase is their primary or only residence
  • It is a self-contained property used for a single purpose
  • The applicant has a legal and valid contract with the landlord
  • The tenant has lived in a council property for at least three years
  • It is owned and let by a recognised public sector landlord
  • The property is located in England (there are separate schemes for Wales and NI)

If all of these conditions are met the tenant has the right to purchase the property at a discounted rate. If the landlord makes a suitable offer and the sale is agreed it falls with the tenant to make the necessary mortgage arrangements.

Are there different types of secured loans specifically for Right to Buy or are Right to Buy mortgage applications processed as normal?

Right to Buy Mortgages Explained

It’s a common misconception that a separate type of ‘ Right to Buy mortgage’ is available for those who qualify under the scheme. In reality, there’s technically no such thing. Nor does Right to Buy in any way adversely affect mortgage eligibility.

Qualifying under the Right to Buy scheme could increase your likelihood of qualifying for a mortgage.

Homebuyers in the United Kingdom are now expected to hand over initial deposits of averaging around £50,000. This is a sum significantly higher than most everyday earners can afford. With Right to Buy, the discount afforded under the scheme is accepted by most lenders in place of this deposit.

If you qualify for a discount under the Right to Buy program there is a good chance you won’t need to come up with any deposit. At the very least you will have a significantly reduced deposit if you qualify for a smaller discount. This opportunity can broaden the options available for Right to Buy mortgage applicants who may otherwise have struggled to qualify for a good deal.

What Else Impacts Eligibility for Council House Mortgages?

Eligibility for a council house mortgage is similar to traditional mortgage eligibility. There are several factors that may stand in your way of qualifying for a competitive mortgage, including but not limited to the following:

  • A poor credit history: Credit checks are carried out where mortgages are issued, impacting not only eligibility but also interest rates and wider borrowing costs.
  • Applications during retirement: Some lenders restrict secured loans for home purchases to applicants under the age of 75 or even 70.
  • Self-employment: It may be advisable to work with a specialist lender if you are self-employed.
  • Non-standard construction: if the council property you live in features any non-standard construction elements it could affect your eligibility.

 In Summary…

Right to Buy does not have any direct bearing on mortgage eligibility. In order to qualify for a competitive mortgage you will still be expected to meet the same basic criteria as any other borrower. Work out the costs of a mortgage using our Mortgage calculator UK

If you have any questions or concerns regarding your eligibility under Right to Buy or would like to discuss mortgage options in more detail, we’re standing by to take your call. Contact a member of the team at UK Property Finance for an honest, obligation-free consultation.

Category: Mortgages