Pete Mugleston | Mortgage AdvisorPete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.
Updated: 27th March 2019 *
We receive lots of enquiries from customers wanting to know more about the Right to Acquire mortgage scheme. Right to Acquire helps eligible housing association tenants get a foot onto the ladder by giving them the opportunity to buy their currently rented home at a discounted rate.
Read on to find out whether you’re eligible, and what other factors Right to Acquire mortgage lenders will take into consideration if you apply.
Right to Acquire is a government scheme which allows many housing association tenants in England to buy their rented home at a discounted rate, provided you’ve rented from a public sector landlord for three or more years.
These type of landlords include:
The armed services
NHS trusts and foundation trusts
Right to acquire mortgages explained
Through the Right to Acquire mortgage scheme, you could potentially receive a discount of £9,000 up to a maximum of £16,000, depending on the value of the property and where abouts in the country you live. Your discount may be reduced if you’ve used either the Right to Acquire or Right to Buy schemes in the past.
Assuming you meet the government requirements, you would then (usually) put down a deposit, and go about applying for a mortgage to cover the rest in the usual way. This would move you from renting to mortgage terms under the Right to Acquire scheme.
There are of course certain criteria you have to meet in order to benefit from Right to Acquire, and there are other individual circumstances that may impact the number of providers willing to lend and what rates you’re offered - read on to find out what these are. You can also visit the government website and use the Right to Acquire mortgage calculator which will give you a general idea of your eligibility.
What does the Right to Acquire Mortgage process involve?
The Right to Acquire mortgage process is pretty straightforward. You must first fill out a Right to Acquire application form (available here), and send it to your landlord.
Landlords are legally required to respond with a “yes” or “no” within four weeks of receiving your application (or eight weeks if they’ve been your landlord for three years or less). If your landlord declines, they must provide you with a valid reason. You are not able to appeal against your landlord’s decision.
Provided your landlord agrees to sell, they will send you an offer, which they must do within eight weeks of approving your request if you’re buying a freehold property, or within 12 weeks for a leasehold. Alternatively, your landlord may offer you the choice of buying another empty property that they own (but they are not obligated to). You have the choice to either accept or deny this offer.
Am I eligible for a Right to Acquire mortgage?
The government has several basic requirements you must meet in order to be considered for the Right to Acquire mortgage scheme. As well as needing to have a public sector landlord for 3+ years, this landlord must be registered with Homes England. The property you want to buy must also be a self-contained property, and your only or primary home.
Additionally, the property you’re currently renting must either have been:
Built or bought by a housing association after 31st March 1997, and funded through a social housing grant by either the Housing Corporation or local council.
Transferred from a local council to a housing association after 31st March 1997.
Joint applications and Right to Acquire mortgages
Lots of customers ask us whether they’re able to make joint mortgage applications under the Right to Acquire scheme, and, yes, this is possible. You can make a joint application with either:
An individual who shares your tenancy.
Up to three family members who have lived with you for the past 12 months (even if they do not share your tenancy).
What other factors impact my Right to Acquire mortgage eligibility?
You are automatically exempt from using Right to Acquire if you have been made bankrupt or had your home repossessed in the past (we’ll be covering other adverse credit issues later on). You are also exempt if you’re a council tenant - although you maybe able to use the government Right to Buy scheme.
As always, there are also additional factors which can impact eligibility on a mortgage for Right to Enquire:
Deposit and Right to Acquire mortgages
So, how much cash will you need to have saved for a Right to Acquire mortgage deposit? 5 - 10% deposit is a ballpark figure in most cases, however this can vary considerably depending on your provider, and will also be affected by other individual circumstances. The majority of lenders will also have a cap on how much deposit you can put down when taking advantage of this scheme.
Customers often ask whether they can get a Right to Acquire mortgage with no deposit saved. Some lenders do allow you to use the scheme’s discount as a deposit in itself, although you may not be offered as competitive rates as you would by contributing out of your own pocket. This is why we urge you to seek advice from a whole-of-market broker who can scour the vast range of lenders out there to find the best deal to suit you. Get in touch to speak with one today.
When you apply for any mortgage, lenders will want to know how much you earn, the source of your earnings and how much disposable income you have (among other things), to assess your affordability before agreeing to loan you money.
Remember, when you take out a mortgage it’s not just the repayments you have to think about - there are also legal, valuation and arrangement fees. So make sure to work this into your calculations before applying.
Income and Right to Acquire
Lenders want to know how much disposable income (earnings minus all outgoings) to calculate your debt-to-income ratio. Generally, the higher your income and lower your debt-to-income ratio is, the more money providers should be willing to loan you (although most will have caps on lending over certain amounts).
Income multiples help give you a rough idea as to how much you are likely to qualify for. The majority of lenders cap lending and 3 - 4 times the amount of your joint income, some may consider up to five times the amount, an a handful will accept six - provided you meet the remaining criteria.
More information about how mortgage lenders assess income can be found here.
Employment status and Right to Acquire
Mortgage providers will also consider the source of your income. This is because different sources are classed as higher or lower risk than others. For example, if you receive the majority of your income in benefits, you may be considered higher risk than someone in steady, full-time employment.
Those that are self-employed are also generally perceived as higher risk, but the longer you’ve owned your own business (provided you have the accounts to back it up), the more it tends to work in your favour - provided the net income meets requirements. Most lenders are happy to consider you if you’re self-employed and have 3+ years’ accounts on record, some accept two, and a few will accept if you have one years’ worth.
Bear in mind however, that even if you’re in steady, permanent employment, there are certain lenders who do not take bonuses or commission into consideration when calculating net income, while others may only accept a capped percentage of supplemental income sources.
For further information about self-employed mortgages, consult our dedicated page on the topic.
Age and Right to Acquire mortgages
Older borrowers can have more difficulty securing a mortgage than younger ones. This is because some providers have a cap on the maximum age in which you can apply, or the age you will be at the end of the term, therefore limiting lender options. Similarly, if you’ve retired some providers may not consider you if you don’t have proof of a steady income. However, this is not the case with all lenders and you can rest assured that there are options out there for everyone!
Some lenders won’t lend to anyone over 75, while others can stretch to 85 and a minority will go beyond that, as long as they’re confident you can keep up with the mortgage payments in your twilight years.
Adverse credit issues and Right to Acquire Mortgages
So, can you still get a Right to Acquire mortgage with bad credit? As with all instances of adverse, it’s very much dependant on the severity and recency of the issues, alongside your other circumstances.
As mentioned earlier on, if you’ve experienced severe adverse credit issues such as bankruptcies and repossessions you are unlikely to be eligible for the Right to Buy scheme.
However, there are new Right to Acquire mortgage providers popping up all the time, so it’s important to speak to a whole of market broker who can put you in touch with a specialist. Contact us and find out if we can help you and head over to our dedicated page on bad credit mortgages to find out more.
Which Lenders will consider me for a Right to Acquire mortgage?
As we’ve covered, there are a huge number of providers out there, all of which have different policies and will have different stances on how your particular circumstances impact your eligibility. Many high street lenders, challenger banks and other providers will consider offering a Right to Acquire mortgage to anyone who meets their eligibility requirements, but how do you choose the right lender?
The best way to find the lender most likely to offer you a favourable deal is by applying through a whole-of-market broker - that way you will have access to all of the best Right to Acquire mortgages you’re eligible for.
Make an enquiry and the advisors we work with will search the entire market for you and connect you with the provider best positioned to help.
Can I use the Mortgage Rescue scheme with a Right to Acquire mortgage?
Not anymore, unfortunately. You can no longer apply for the Mortgage Rescue scheme as the government has since folded the initiative.
If you’re having difficulty paying your Right to Acquire mortgage, you should contact your lender to discuss your payments, but you can also make an enquiry to speak with a specialist advisors who will go over all of the available options for you.
Speak to a Right to Acquire mortgage expert today
If you have any questions and want to speak to a Right to Acquire expert for the right advice, call Online Mortgage Advisor on 0808 189 2301 or make an enquiry here.
Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances. We don’t charge a fee, and there’s no obligation or marks on your credit rating.
*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA.Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.
Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes.
The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.
Pete's presence in the industry as the 'go-to' for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!
Read more about Pete here...