Right to Buy scheme
Published 15th August 2017
New for 2016/17: Right to buy criteria accepts more borrowers
Borrowers looking for the right to buy that were perhaps declined due to adverse credit, self-employment, or affordability, may now benefit from changes in the lending criteria and the addition of new lenders into the market. Since the start of Oct 2016, it is now possible to obtain a right to buy mortgage in the following circumstances:
Right to buy with bad credit:
- Issues in the last 12 months
- Low credit score
- Late payments
- Recent Defaults
- Recent CCJs
- Debt management plans
Right to buy if self employed:
- New business (trading 12 months)
- Use latest years figures
- Use retained profits
- Use dividends & salary
- Contractors considered on day rate
- Many other scenarios
What is the right to buy scheme?
Right to buy is one of the government mortgage schemes available to tenants of council property in England (There's separate schemes for Scotland, Wales and Northern Ireland) . There's no special lending involved, no weird and wonderful criteria - it simply offers creditworthy potential home-owners the chance to buy their home, sometimes with massive discounts. Also, as many lenders allow the discount to count towards purchase deposit, many of those eligible for Right to Buy can do it with no deposit at all.
There used to be a strict limit on the amount of discount a local authority could offer tenants, but this has been increased massively, with the top discount being £75,000 and £100,000 in London boroughs. This means that, so long as the mortgage is affordable, a tenant could buy a £300,000 property for £200,000. The actual discount is decided centrally not locally, and depends on the valuation and location of the property at the time of your application.
How much Right to Buy discount can I get?
This is dependant on a lot of things, including the length of time you've been in council property, the location, and after an official valuation of the property. The HMRC have devised a handy tool to help give you an idea of the likely discount you'll get, check out the Right to Buy calculator here
How do I qualify for the Right to Buy?
To be eligible for the right to buy, you'd need to have 5 years as a public sector tenant. This time does NOT have to be continuous or in the same property, you can add up your total time in council property and if its more than 5 years you're eligible. The 'public sector' includes any local council, housing association or government department.
Can I buy joint with someone else?
Yes, buy they'll need to have lived with you for the last 12 months, or be a joint tenant with you on the agreement.
When can I sell my right to buy property?
You can sell the property at any point. If its within 5 years you may have to pay back all or some of the discount (dependant on the authority and location). If you wish to sell at any point within 10 years, you must offer the property as an option to your former landlord, who can accept or decline. You can only sell on the open market when they have declined.
Can I get a right to buy mortgage with bad credit?
There's one or two who consider customers with some adverse credit but anyone looking to purchase with a severely damaged report may struggle as the usual 'go to' adverse lenders don't all offer right to buy products - in fact, most don't. To find out, get in touch and an advisor will search the market for you.
Whenever we mention bad credit on the site we are required to note the following:
The overall cost for comparison is 5.6% APR. The actual rate will depend on your personal circumstances. Ask for a personalised illustration.
In reality, there are some very attractive adverse credit mortgage rates in the market currently (at the time of writing), and your rate may well be lower than this depending on circumstances.
Can I borrow more money on the right to buy mortgage?
One of the great things about Right to Buy is that the discount enables borrowers to buy without deposit, furthermore, it's sometimes possible (if the lender and local authority agree) to borrow into the equity discounted for money towards home improvements - a fantastic prospect.
Example. A council tenant has the option for the right to buy on their property they've lived in for 12 years. They apply through their local authority, who gets the property valued and after assessing the application sends the paperwork through offering them the maximum discount, valuing it at £150k, offering it to purchase for £110k. They will also allow a certain element of additional borrowing for home improvements, which is great as they could really do with a new kitchen and to do some decorating elsewhere. The customers approach their mortgage adviser who secures them a mortgage for £120k, without them requiring any deposit. At 80% loan to value, the rates are pretty competitive and they are able to comfortably afford repayments.
Right to buy mortgage lenders
There's a large list of mortgage lenders that consider Right to Buy purchases, most of whom are high street clean credit lenders. The mortgage itself is the same as any other standard mortgage, and usually if a lender accepts Right to Buy, you'll be eligible for all of their products at your specific Loan to value (LTV).
The LTV makes a big difference to your rate, the lower the loan compared to the value, the better your rate will be.
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