Right to Buy Mortgages

What are the eligibility criteria for Right to Buy?

To be eligible for the Right to Buy scheme, you have to meet the following criteria:

• Your property is your main or only home (can either be a house or a flat)
• It is self-contained, and you don’t share any rooms with people outside your household
• You have a secure tenancy
• You’ve been a council or public sector tenant for at least three years, not necessarily continuously

As well as the above, most lenders will expect you to meet the following key criteria:

• Confirmed RTB eligibility and documentation
• Discount value vs property price

You won’t be eligible for Right to Buy if you live in sheltered housing. Some property types, such as those owned by the armed forces, are exempt from the Right to Buy scheme. This government document shows all the exempt property types.

You can use the Right to Buy scheme as a single person or as a joint purchase with someone who shares your tenancy or with up to three family members who’ve lived with you for the past 12 months, even if they aren’t on your tenancy.

You should consider the following questions before you apply, too:

• Are you a council or housing association tenant?
• Do you have the RTB eligibility confirmed (Have you received your Section 125 notice?)?
• What is the value of the property and your discount?
• Do you have any deposit in cash to put in?
• Do you plan to borrow only the discounted price or more (e.g. for improvements)?

If you rent your home from a housing association rather than a local council, you may still be eligible to buy your property at a discount through a similar scheme called Right to Acquire.

How to apply for the scheme and get a mortgage

Once you’ve checked you’re eligible for Right to Buy, the next step is to apply for the scheme and secure a mortgage. We’ve outlined the rough process you’ll follow below.

Bear in mind that this is a general outline of the process. Depending on your circumstances, you may need to follow some additional steps.

• Work out the costs: Once you know you’re eligible for the scheme, you need to get an idea of what you can afford before you proceed. Look at your savings and income and figure out whether you can afford the costs of owning a home, such as maintenance and repayments.
• Complete an application form: In the first instance, you’ll need to submit a Right to Buy application form (RTB1 notice) to your landlord. You can complete the form online or print it out. If you need help, you can contact a Right to Buy advisor. Print out the form, sign it, and send it to your landlord by recorded delivery so you have a receipt.
• Wait for a reply: Once you’ve sent off your application, your landlord has 4 weeks to say yes or no and must give a reason if they turn you down. If your landlord approves your application, they will calculate your discount and send you an offer. They have 8 weeks to do this for freehold properties and 12 weeks for leasehold.
• Receive an offer: Once you’ve received their offer and calculation, you have 12 more weeks to decide if you want to proceed. Your mortgage broker can help guide you through the application to ensure you’ve included all the necessary information and avoid unnecessary delays.
• Finding the right mortgage lender and securing the best deal for you: If you accept your landlord’s offer, you’ll need to look at deals from mortgage providers. A mortgage broker will be able to identify lenders who cater to 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: You’ll need to gather all the typical documents required – proof of income, recent bank statements, personal ID, download your credit reports, etc. You will also need to produce any documentation relating to your eligibility for the Right to Buy scheme. A broker can help you with this if you need help.
• Arrange your mortgage and surveys: The next step is to arrange a mortgage, which you can do yourself or through a broker. Once you have a mortgage arranged, you’ll need to start the conveyancing process, which includes surveys such as water and drainage searches and the legal processes involved with purchasing a property. Again, a broker can help guide you through all this if you’re unsure what to do.

It’s a good idea to find a mortgage broker with experience helping people arrange home loans using the scheme. You can speak to one of our expert advisors who specialises in this area by enquiring online.

They can help guide you through the process and answer any questions you might have about applying for a mortgage.

Mortgage eligibility criteria

In addition to qualifying for the Right to Buy scheme, you will also need to meet your lender’s eligibility criteria to be able to secure your mortgage.

The process for a Right to Buy mortgage will be just as stringent as a standard application. First, your lender will look at affordability, using your income and financial commitments to set a limit on what you can borrow – typically 4.5 times your salary.

If you receive a discount from the Right to Buy scheme, some lenders will consider that a deposit and you might get more favourable loan-to-value terms as a result.

You can use our affordability calculator below to see how this could work out for you based on your annual income:

They will then look at other factors to assess your suitability for the home loan, including:

• Deposit/loan-to-value (LTV)
• Age
• Employment status
• Credit history

Advantages and Disadvantages

Before proceeding with your Right to Buy application, it’s worth understanding the main pros and cons of using the scheme to buy your current home.

Advantages

• Discount on the cost of your home: Depending on how long you’ve lived in the property, you receive a discount, which makes purchasing the property easier
• Stability and security: You don’t need to move house as you’re purchasing the one you currently rent. Plus, you now have the security of owning it rather than renting
• Personalisation: You can make alterations and improvements to your home without needing landlord approval

Disadvantages

• Eligibility restrictions: Not all council tenants will be eligible for the scheme, which limits its accessibility
• Lengthy process: It can take a while if you have to wait for your landlord’s approval/offer and can also add an extra layer of complications down the line should you wish to remortgage or sell
• Pay back your discount: If you sell within 5 years, you’ll be required to pay back some of the discount on a sliding scale, and even after this 5 years is up, you’ll still need to offer your local council or a local social landlord first refusal should you sell within 10 years
• Financial Responsibility: You’ll be responsible for all maintenance and repair costs, which can be costly

Which lenders offer Right to Buy mortgages?

Plenty of Right to Buy mortgage lenders are available, but it’s not always easy to determine their terms and criteria.

This is why it’s always best to speak to a specialist broker who knows the sector inside-out, but to give you an idea of the options available, here are some mortgage lenders that will consider applications of this nature:

• NatWest offers Right to Buy mortgages of up to 100% of the discount price or 90% of the market value (whichever is lower).
• Barclays will consider applications to borrow up to 95% of the discounted price or up to a maximum of 80% of the property’s market value
• Halifax can offer lending up to 100% of the discounted price
• Skipton Building Society will lend up to 100% of the discounted price

Most of the time, you’ll have access to the lenders’ standard mortgage range, but each will have its own set of criteria and lending limits, so it’s important to speak to a broker ahead of time so you can be certain you’re approaching the lender that’s right for you.

What rates do they typically offer?

As with all mortgages, Right to Buy mortgage lenders’ rates can vary depending on the provider and your circumstances (remember, you’ll need to pass all usual affordability and eligibility criteria to be approved).

The table below provides a snapshot of the typical mortgage rates on offer at the moment:

Please note that the above rates were accurate at the time of writing but are always subject to change at the lender’s discretion. The best way to find the most up-to-date deals is to speak to a mortgage broker.

Selling your Right to Buy home

Once you’ve bought a property using the Right to Buy scheme you can technically sell it whenever you like. However, there are certain time scale restrictions that you should be aware of.

If you sell your property within 5 years of buying it, you’ll have to pay back a proportion of the discount you received. This works on a sliding scale where you’ll have to repay the full discount if you sell the property within your first year of home ownership. After that, what you have to repay is as follows:

• Second year: 80% of the discount
• Third year: 60% of the discount
• Fourth year: 40% of the discount
• Fifth year: 20% of the discount

After five years you don’t have to repay any of the discount. However, if you sell within 10 years, you must give your old landlord or another social landlord in the area first refusal. If your landlord rejects the offer to buy, you can sell your property on the open market.

It’s important to note that the amount you pay back depends on the value of your home when you sell it. So, if your home has increased in value since you bought it, the proportion of what you pay back will increase, too.

If you bought your home through the Right to Buy scheme when it was valued at £200,000 and you received a 40% discount (£80,000), you will have paid £120,000 in total. If you decide to sell your home three years later, but it’s now valued at £220,000, the 40% discount you originally had would now be £88,000. As you’re in your third year of ownership, you would repay 60%, which equals £52,800.

Can you remortgage a Right to Buy property?

Yes, you can, and it is possible to release additional equity through remortgaging, too. But don’t be fooled into thinking that buying a discounted Right to Buy property means you can immediately release the equity you gain from the discount—it’s not an easy route to free cash.

Normally, remortgaging involves assessing your equity, comparing eligible deals, and taking out a new mortgage through a new or existing lender.

However, when you have bought your property through Right to Buy, you’ll also need to speak to your local authority first to discuss your plans with them and get their approval. This isn’t guaranteed, especially if you want to increase your borrowing over and above the original discounted price.

Are there lenders for borrowers with bad credit?

Yes, though your options may be more limited, not all lenders can accommodate applications of this nature. Among those who do, you’ll usually be subject to stricter eligibility criteria and higher interest rates, so it’s important to factor this into your affordability calculations.

However, except for severe issues such as bankruptcy, having bad credit won’t completely prevent you from getting a Right to Buy mortgage. Some lenders can overlook credit issues if they happened more than six months ago (or even three months in some cases), and others may still be able to approve you depending on what the issue was, with, for example, missed or late payments often tolerated better than IVAs.

But it will all depend on your credit history and the provider you’re approaching. It’s vital to check your credit reports in advance so you know exactly what the issues are before you apply.

How Online Mortgage Advisor can help

If you’re ready to learn more about Right to Buy mortgages and want help finding the perfect lender, it’s time to get in touch. One of our expert advisors can help you find your ideal mortgage, and it couldn’t be easier to get started.

Just call us on 0330 818 7026 or make an enquiry, and we’ll do the rest. We’ll simply ask for a few details and, from there, one of our advisors will be in touch.