Pete Mugleston | Mortgage AdvisorPete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.
Updated: 28th August 2019 *
The government’s Right to Buy scheme has seen something of a revival in recent years, and as a result, we’re getting lots of queries from customers looking for the best mortgage lenders for Right to Buy purchases.
If you’re a council tenant looking to take your first step into the world of home ownership, we can help to make that dream a reality even if you’ve been turned down by mortgage lenders in the past.
In this article we address some of the most common questions about Right to Buy mortgage providers and their policies, including:
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Am I eligible for Right to Buy with any mortgage lender?
To qualify for Right to Buy, you (and up to two additional borrowers) will need to have lived in your current council property for at least three years. If you’re unsure of the exact length of your tenancy, contact your landlord. Next, you’ll need to demonstrate that you can cover the costs of setting up and servicing the required mortgage over a number of years.
Once you’ve done the sums and are ready to apply for a mortgage, you’ll need to be able to demonstrate that you meet the mortgage lender’s eligibility criteria, which will include factors such as household income, credit history, employment status and your age.
You shouldn’t need to look for a specialist provider, as many lenders make their standard mortgage products available to Right to Buy customers.
To ensure you have access to the best Right to Buy mortgage lenders and products, make an enquiry and we’ll put you in touch with an advisor who can help find the best solution for you.
Can I get a Right to Buy mortgage with no deposit?
Most mortgage lenders do require a deposit. However, due to the structure of the Right to Buy scheme, the deposit may be covered by your Right to Buy discount, so depending on the size of your discount and the value of the property, you may not need to have set aside significant funds.
Many mortgage lenders may be able to offer 100% mortgages on a Right to Buy purchase, as they will use the discounted purchase price of your home, and many will also lend additional funds for home improvements at the same interest rate, typically up to 70% of the property’s market value. This will be cheaper than borrowing money from your bank or taking out any other unsecured loan.
Finding the best Right to Buy mortgage providers
There are no dedicated ‘council house mortgage lenders’, and in fact most of the best-known providers support Right to Buy. So as long as you meet their criteria, you should have access to the same trusted names and interest rates as you’d have for any other property purchase.
At the time of writing, there are several high street bank Right to Buy mortgages available, as well as numerous options with specialist lenders, and many of these have quite strict criteria, so getting the right advice to match you with the best deal is all the more important.
For instance, Santander Right to Buy mortgages are unlikely to lend to people who have bad credit history, and Natwest Right to Buy Mortgages typically need to be repaid no later than retirement age. If you had a recent bankruptcy or IVA, you will struggle to get a Right to Buy mortgage from Lloyds or HSBC.
And bear in mind that if you approach a mortgage lender directly, you will only have access to their own limited range of products.
By going through one of the expert brokers we work with, they look at the whole of market and have a duty of care to ensure you receive the best deal to suit your circumstances. Make an enquiry to get started.
A handful of lenders do not offer Right to Buy mortgages; Chelsea Building Society for example does not usually provide any Right to Buy products.
Lenders’ criteria for Right to Buy mortgages
To qualify for your preferred Right to Buy mortgage you will need to demonstrate to the lender that you can afford the purchase and make repayments in line with the mortgage contract – just as with any other mortgage. Factors they’re likely to look at to determine your suitability as a borrower will include:
Loan-to-value (LTV) i.e. the ratio of the amount being borrowed to the value of the property.
If you have any concerns about your eligibilty, make an enquiry and we’ll match you with an advisor who is experienced in helping Right to Buy customers find the right mortgage.
How much can I afford to borrow for a Right to Buy mortgage?
Like all lenders, Right to Buy mortgage providers will take a number of factors into account when calculating whether the amount you want to borrow can be considered ‘affordable’.
Mortgage lenders will want to see evidence of your income (employment/self-employment or a pension and any other sources), monthly outgoings, financial commitments, your employment status (including how long you’ve been in your current job and whether you’re still in your probationary period), including the details for any joint borrowers.
Mortgage lenders will not accept housing benefit as a source of income, since this is not available to tenants once they become homeowners, and many state that other benefits are not acceptable either.
For example, as of writing Nationwide’s Right To Buy mortgage specifically excludes housing benefit as an income source even where the DWP agree to pay Income Support Mortgage Interest (ISMI) in its place. Similarly if you’re applying for any of Precise Mortgages’ Right to Buy products, you won’t usually be accepted if you’ve received housing benefit in the past 12 months.
Having established your income, most mortgage companies will agree to lend an amount equivalent to 4 times your annual salary (or combined salary if making a joint application), so if you’re earning £40,000 p/a, they will lend up to £160,000. Some will allow multiples of 5 x your salary, and a few will even offer 6 x your salary in the right circumstances.
Types of Right to Buy Mortgage Lenders
As with most other mortgage types, different lenders will offer different Right to Buy mortgages to provide loans for borrowers of all backgrounds.
While the lender will need certain criteria met, no two lenders are the same, which is where an expert mortgage broker can help. They have whole-of-market access, meaning that they can find deals to suit your needs – some of which aren't even available to the public.
See below for the types of right to buy mortgages that lenders could offer:
Many lenders will consider borrowers with adverse credit for a Right to Buy mortgage, so while it may reduce access to some lenders, it shouldn’t rule you out.
Some mortgage lenders take a more stringent approach to credit issues than others, and most will have their own policies around what they can and cannot accept in terms of credit issues.
For example, Right to Buy mortgages with Halifax or Barclays won’t usually consider a borrower with recent credit issues, but there are still some lenders happy to approve depending on what the issues are. Some mortgage lenders will overlook defaults and arrears that took place more than six months ago, and a few will accept three months.
Some lenders won’t accept a history of bankruptcy or repossession regardless of when it took place, for example Right to Buy mortgages with Woolwich will not usually consider borrowers with these events on their record.
Many lenders offer self-employed mortgages, and are happy to approve customers that can demonstrate that their projected income will be sufficient to cover the repayments. You will usually need to provide the last two years’ tax returns or accounts along with the other documents used to demonstrate affordability, and the way lenders treat your income will be different.
Different types of property
If you’re looking to get a Right to Buy mortgage on a non-standard property, fewer lenders will accept your application or may insist on more stringent checks. For example, if your home is in a high-rise block, some lenders will want to arrange a more detailed structural survey and sometimes a specialist valuation.
Many Right to Buy mortgage lenders place a limit on block height, for example Leeds Building Society Right to Buy mortgages won’t usually accept flats in blocks higher than 4 storeys, while Skipton Right to Buy mortgages won’t usually accept ex-local authority blocks of more than 5 storeys.
The advisors working with us can help you to find Right to Buy mortgage providers that are able to lend to you even if your property has some unique or unusual quirks, so don’t hesitate to get in touch so we can match you up with an expert in the field.
Borrowers at or nearing retirement age may find it harder to get a mortgage agreed, but mortgage lenders vary in their policies towards borrowing in later life.
For example, some mortgage lenders will specify that at least one applicant must be below 55 years of age at application, while many will decline if the term is due to end after the one or more applicants reach a specified age.
For example, you won’t usually be approved for a Santander Right to Buy mortgage if your or any other applicants’ 75th birthday falls before the end of the payment term, while those going for a Barclays’ Right to Buy mortgage will need to ensure they are no older than 70 years of age at the end of the term,
Looks like I have multiple issues. Can I still get a Right to Buy mortgage?
If several of the “non-standard” issues detailed above, such as being self-employed and having bad credit, apply to you, don’t panic: there are many factors to consider, and lenders know that no two borrowers’ circumstances are completely alike.
Having multiple issues will inevitably mean that fewer mortgage lenders will consider your application which can further reduce access to the best available rates, but the advisors we work with have an overview of the entire market and will work hard to help you find the best possible deal within these constraints.
Make an enquiry and we'll match you with an expert to discuss your options.
Secured loan lenders for a Right to Buy property
Secured loans are a financing method that homeowners can use when looking to raise capital, sometimes up to as much as 10 x your salary. Also known as ‘second charge loans’ or ‘second charges’, but in essence they are a second mortgage on a single property, with that property as the security.
If you purchased under Right to Buy within the past five years, you are still in the preemption period and may find it harder to find lenders willing to arrange a secured loan. However, there are a handful of mortgage lenders that can grant them during this period.
Mortgage lenders usually do this by taking out an indemnity policy against the loan to cover any potential claims by the local authority, in case the borrower sells the property during the preemption period. Rates and fees for the secured loan are likely to be higher.
Alternatively, you can simply wait until the preemption period has elapsed, since the council will no longer have any rights over your property after this period, and it can therefore be treated like any other property.
Speak to a Right to Buy mortgage expert today
If you have questions and want to speak to an expert for the right advice, call us on 0808 189 2301 or make an enquiry.
*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...