Right to Buy Mortgages
Getting onto the property ladder is one of the toughest challenges today. Saving enough for a mortgage deposit is particularly daunting, especially in a housing market that demands significant time and financial resources. Fortunately, the UK Government offers various schemes to help prospective homeowners, such as the Right to Buy scheme. This scheme allows eligible tenants to purchase the home they currently occupy at a substantial discount.
While Right to Buy offers significant savings, it has specific eligibility criteria that can be difficult to navigate. Determining if it’s the right option for you depends on your personal circumstances, which can be overwhelming to assess. To make an informed decision, it's integral to understand all aspects of Right to Buy mortgages. This guide will cover the key details you need to know to find out if this is the right path for you. We will go over:
What is a Right to Buy mortgage?
A Right to Buy mortgage is obtained through the Right to Buy scheme, introduced by the UK Government in 1980 to help council house tenants purchase their homes at a discounted price.
Despite some changes over the years, the core purpose remains the same: to offer tenants a pathway to homeownership. Right to Buy mortgages work like standard residential mortgage types but come with the added benefit of a discount.
How much is the Right to Buy discount?
The Right to Buy discount depends on several factors, including how long you’ve been a tenant, the type and value of the property, any investments made by the landlord, and your location. As of 2024, the maximum discount is £136,400 in London and £102,400 in the rest of England, adjusted annually in April based on the consumer price index (CPI).
For houses, the discount starts at 35% after 3-5 years of tenancy, increasing by 1% for each additional year, up to 70% or the maximum cash limit. For flats, the discount starts at 50% after 3-5 years, increasing by 2% per additional year, also capped at 70%.
To calculate your specific discount, you can use the Government's Right to Buy discount calculator.
Can I get a Right to Buy mortgage?
Your landlord must confirm your eligibility for Right to Buy. To check if you qualify, you can take the Government’s Right to Buy eligibility quiz, which assesses if:
The property will be your main residence.
You've lived in a council, housing association, or NHS trust property for 3-5 years.
It’s the only property you use.
It’s a self-contained property.
The home isn't reserved for elderly or disabled residents.
You have a legal agreement with your landlord.
Your landlord can refuse to sell the property if it is specifically suited for elderly or disabled people, is sheltered housing, is set for demolition, is on land designated for development, or is in a protected rural area. If you disagree with the landlord's decision, you can appeal to the Residential Property Tribunal within 56 days.
Do you need a deposit for a Right to Buy mortgage?
One of the main advantages of a Right to Buy mortgage is that you often don't need a deposit, as many lenders accept the Right to Buy discount as your deposit. For example, if you buy a property worth £150,000 with a 35% discount (£52,500), the lender may offer a mortgage for the remaining £97,500.
That said, some lenders still require an upfront deposit, typically 5-10% (90-95% LTV) of the property's total value, regardless of the discount. This is why it is vital to find a lender who understands your financial situation. Additionally, it’s wise to have some funds set aside for extra fees and charges associated with any mortgage package.
What are the affordability criteria for Right to Buy mortgages?
When seeking a mortgage to buy your council home, you'll be required to meet the same affordability standards as any other mortgage applicant. This involves a thorough assessment of your income and expenses, as well as passing the lender’s credit check.
If you’re self-employed, be prepared to provide at least two years' worth of accounts to demonstrate your income. It's important to note that if you lack any form of income - whether from employment or self-employment - obtaining a mortgage may be difficult, even if you qualify for a sizable Right to Buy discount.
Can I get a Right to Buy mortgage with bad credit?
Yes, you can get a Right to Buy mortgage with bad credit, but it will be more challenging. Lenders conduct hard credit and affordability checks to ensure you can make monthly mortgage repayments.
A low credit score or a history of financial issues (like payday loans, CCJs, IVAs, or bankruptcy) can label you as a ‘high-risk’ applicant, reducing your chances of approval. However, if these financial issues occurred over six years ago, their impact is less severe. The key is finding a lender who understands your unique financial situation.
It’s worth noting that hard credit checks leave a mark on your report. As such, if you want to get an idea of your current eligibility before you apply for a mortgage, you can use our free credit check tool (£14.99 per month after the free 30-day trial). Using it will help you to seek out any possible mistakes or fraudulent activity on your profile, so that you can deal with such problems as soon as possible. The trial and subscription can be cancelled at any time.
What is Right to Acquire?
If you don’t qualify for the Right to Buy scheme, then you may be eligible for the Right to Acquire scheme. This initiative allows housing association tenants to purchase their homes at a discount.
The eligibility criteria are similar to those for Right to Buy; namely, you must have had a public sector landlord for at least three years, and the property must be self-contained and your primary residence. In addition, your property must meet one of the following conditions:
It was built or purchased by a housing association after March 31, 1997.
It was transferred from a council to a housing association after March 31, 1997.
Keep in mind that the discount under Right to Acquire is not as substantial as that of Right to Buy, with a maximum discount of £16,000.
Can I sell my Right to Buy home?
Yes, you can sell a Right to Buy home at any time. Although, if you sell within the first five years, you must repay some or all of the discount you received. Selling within the first year requires repayment of the entire discount, which decreases annually: 80% in the second year, 60% in the third, 40% in the fourth, and 20% in the fifth. If you sell after five years, no repayment is required.
If the home's value increases, the repayment amount is adjusted accordingly. If you sell within the first 10 years, you must first offer the property to your landlord at full market value. If they decline within eight weeks, you can sell it on the open market.
Can I rent out my Right to Buy home?
If you purchase a council home through the Right to Buy scheme, you cannot obtain a buy-to-let mortgage for the first five years. The Right to Buy regulations require that you live in the property as your primary residence for a minimum of five years before you are allowed to rent it out.
Can I make a joint application for Right to Buy?
Yes, you can make a joint application for a Right to Buy mortgage. You can apply with someone who shares your tenancy, a spouse or civil partner, or up to three family members who have lived with you for at least a year.
When applying jointly, the length of time that each applicant has been a public sector tenant will be considered to determine the discount you may be eligible for. Specifically, the discount is calculated based on the longest-serving public sector tenant among the applicants.
Can I remortgage my Right to Buy property?
Yes, you can remortgage your Right to Buy property. Though, since you've purchased your property through Right to Buy, you must first consult with your local authority. They will need to approve your remortgaging plans, and approval is not guaranteed, particularly if you intend to borrow more than the original discounted price.
How to get a Right to Buy mortgage
To apply for a Right to Buy mortgage, complete an RTB1 Right to Buy application form and submit it to your landlord. They are required to respond within 4 weeks. If your landlord denies your application, then they must provide an explanation for their decision.
If your application is approved, the landlord will send you an offer letter known as a Section 125 Notice. This document outlines the following:
The purchase price after discount.
The method used to determine the house price.
A breakdown of how your Right to Buy discount was calculated.
A description of the property and any associated land.
Estimated service charges (if applicable, such as for flats or leaseholds).
Any known structural defects.
Upon receiving the offer, you have 12 weeks to confirm your intention to buy. If you suspect the landlord has overvalued your home, you have the right to request an independent valuation, which must be done within 3 months of receiving the offer. Otherwise, you can decide to withdraw from the purchase and continue renting.
At The Mortgage Genie, we have extensive expertise in how to get a mortgage and are committed to helping clients obtain loans of all types, including those under the Right to Buy scheme. We hope this article has clarified your questions about Right to Buy mortgages and provided you with a clearer perspective.
Every day, we help more people achieve their housing goals by finding mortgage products tailored to their unique situations and financial needs while guiding them through each step of the process. If you’re looking for a team of expert mortgage brokers, contact us at 01915809890, and we’ll help you on your way to owning your dream property. And why not see how much you could borrow up to today by using our mortgage calculator?
This information is a guide only and should not be relied on as a recommendation or advice that any particular mortgage is suitable for you. All mortgages are subject to the applicant(s) meeting the eligibility criteria of the specific lender. You should make an appointment to receive mortgage advice which will based on your needs and circumstances.