Right to Acquire Mortgages

In this article, we’ll explain what a Right to Acquire mortgage is, clarify all the rules and eligibility criteria and how a mortgage broker can help you secure the borrowing you need. 

What is a Right to Acquire mortgage?

This term refers to getting a mortgage through a government scheme in which tenants who are renting a property owned by public sector landlords or housing associations have the chance to buy the home they live in at a discount. 

It provides those who have been in long-term rented accommodation the chance to get their foot on the property ladder and is targeted at residents who live in homes owned by NHS trusts, the armed services and housing associations.

Depending on where you live, the scheme involves receiving a discount of between £9,000 and £16,000 off the market price of your home, and then getting a mortgage as standard on the rest of the purchase, minus any deposit you have saved.

This is a very niche initiative run by the UK Government, with very specific criteria in order to qualify, and your bid to own your home could be rejected outright by your landlord. 

Getting the support of an experienced mortgage broker from the start is advisable as they will help to clarify your prospects and have knowledge of willing and participating lenders.

How is it different from Right to Buy?

In some ways, they are fairly similar schemes, but there are fundamental differences in the features of each, as well as who they’re for. Right to Buy is for council home tenants and the potential discounts are much bigger (up to £96,000 or £127,000 in London), whereas Right to Acquire is meant for a broader spectrum of renters – those in public sector-owned properties already mentioned.

Rules and eligibility criteria

There is a narrow selection process and you and your property must fall within a specific set of criteria:

The Applicant

You (the applicant) must have had a public-sector landlord for a minimum of three years. You are able to make a joint application with someone who shares the tenancy with you or who has lived with you for the previous 12 months (up to three family members). This stands even if they do not share your tenancy.

You’re excluded from applying if you’re being made bankrupt, a court has ordered you to leave your home, you have ‘Preserved Right to Buy’ or you’re a council tenant (you might be eligible for Right to Buy instead).

Your property

It must have been built or bought by a housing association after March 3, 1997 (and funded through a social housing grant provided by the Housing Corporation or local council) or transferred from a local council to a housing association after the same date. If you’re unsure whether this applies in your case, you can check with your local council to confirm when exactly your property changed hands. 

It must be a self-contained property and your primary home.

Your landlord

They must be registered with the Regulator of Social Housing.

Location and discount

Where you live will have a bearing on the discount you get, which is detailed in this Government guide to discounts by location. It will be somewhere between £9,000 and £16,000. If you have used this scheme before, or Right to Buy, your discount may be reduced if you are successful.

What happens if you sell

There are stipulations around putting your home on the open market to discourage people from selling it on immediately.

If you sell your home within 10 years of purchasing via Right to Acquire:

• You must offer your former landlord first refusal of the sale
• It should be sold at the full market price that’s agreed by you and the landlord
• If you can’t agree, an external valuer will be brought in
• If your landlord doesn’t buy your home within eight weeks, you are allowed to sell to anyone

If you sell it within five years, you’ll have to pay some or all of the discount back, as follows:

• First year – all of the discount (total amount is dependent on value when you sell)
• Second year – 80% of discount
• Third year – 60% of the discount
• Fourth year – 40% of the discount
• Fifth year – 20% of the discount

How much could you borrow?

Once you have confirmation you have qualified for Right to Acquire, you’ll then make your application to get a mortgage. How much you are able to borrow will be dependent on a number of factors, from your affordability to your age, your credit rating to your employment status.

Generally speaking, lenders will offer a mortgage based on 4x or 4.5x your annual income, but in some cases, they can go higher. You can see how this could work out for yourself by simply inputting your own annual income into our calculator here.

Having a substantial deposit will reduce your loan-to-value ratio, which will make you a more attractive borrower and could open up better deals when it comes to the rates you’ll pay, however, be wary that some lenders may have a cap on deposits for this scheme.

Applying for Right to Acquire with no deposit might be an option too if you want to use your discount for adding equity instead, but speak to your broker about this.

How to get a Right to Acquire mortgage

Once you’ve checked you’re eligible for Right to Acquire, your next step should be to find a mortgage broker with experience helping people arrange home loans using the scheme.

Using our free broker-matching service you can speak to an advisor who specialises in this area by simply making an enquiry online.

They’ll be able to help with:

• Applying to the scheme: First, you will need to know whether you’re eligible before you can move forward with your mortgage. Click here for the Right to Acquire application forms.
  If your landlord agrees to sell the property (they can refuse or offer you a different property) they will tell you how much they want to sell it for. At this stage, you can either accept or ask for an independent valuation if you think it’s too high. Then you can either decline or accept and move forward with the process.
  A mortgage broker who has experience arranging these types of home loans will be able to help you complete this application form to ensure this stage goes as smoothly as possible. 
• Finding the right mortgage lender and securing the best deal for you: Your mortgage broker will be able to identify those lenders who cater for Right to Buy applications and offer the best interest rate terms available across the whole market. This will save you time and, potentially, some money too.
• Gathering all the necessary paperwork required for your mortgage application: Your broker will be able to help you download your credit reports, guide you through the application process and all the typical documents required – proof of income, recent bank statements, personal ID etc. You will also need to produce any documentation relating to your eligibility for the Right to Acquire scheme.  

Which lenders offer them?

There are just over 20 mortgage lenders who are known to consider applications for the Right to Acquire scheme. These include:

• NatWest
• Santander
• Nationwide
• Barclays
• Halifax

Each lender will have their own internal eligibility criteria, which will vary from another. For example, Santander, Halifax and Nationwide will all consider lending up to 100% loan-to-value (LTV) and use the discount as an appropriate deposit. Barclays will consider applications for up to 95% LTVs. 

Get matched with a Right to Acquire mortgage specialist

Getting the right professional help with what can be a complex, time-consuming application process will increase your chances of success, and the deal you end up with.

The brokers in our network are specialists in their field, with experience and contacts in the marketplace. We can match you with the right person for you, who is five-star rated and highly trained. For a free initial consultation, get in touch on 0808 189 2301 or make an online enquiry.