Can I Get a Right to Buy Mortgage Throughout the UK?
There are different schemes in place in Wales and Northern Ireland.
In Scotland, there is no similar scheme. While you can apply to purchase a council property if they agree it will likely be at full market value.
In Wales, there is a similar scheme but with a maximum discount of £8,000. You need to have been a council tenant for at least five years, although that doesn't have to be within the same property.
Northern Ireland offers a similar scheme with a maximum £24,000 discount, again with a five-year council tenancy requirement. These discounts are not provided on ground floor properties of one or two bedrooms, or sheltered accommodation.
How Much Discount Can I Get on Right to Buy?
The upper limit is capped at £108,000 in London and £80,900 throughout the rest of England - the discount is higher in the capital, given the higher property prices.
Your discount depends on whether you are buying a house or a flat, how long you have lived there, and what the property is worth.
The below table shows the discount available on a house valued at £100,000 - you get a 35% discount if you have been a tenant for between three and five years, plus 1% more for every additional year of residency:
|
Length of Tenancy
|
Discount Available
|
Value of Discount
|
|
Three to five years
|
35%
|
£35,000
|
|
Six years
|
36%
|
£36,000
|
|
Seven years
|
37%
|
£37,000
|
|
Eight years
|
38%
|
£38,000
|
|
Nine years
|
39%
|
£39,000
|
|
Ten years
|
40%
|
£40,000
|
Discounts on flats are different, and start at 50% with an additional 2% discount for each extra year:
|
Length of Tenancy
|
Discount Available
|
Value of Discount
|
|
Three to five years
|
50%
|
£50,000
|
|
Six years
|
52%
|
£52,000
|
|
Seven years
|
54%
|
£54,000
|
|
Eight years
|
56%
|
£56,000
|
|
Nine years
|
58%
|
£58,000
|
|
Ten years
|
60%
|
£60,000
|
How Much Does it Cost to Pay Back a Right to Buy Mortgage?
If you're eligible for Right to Buy, you need to make sure you can afford the monthly mortgage repayments, as well as the general costs to run your home. Expenses include:
- Utilities.
- Council tax.
- Maintenance costs.
- Insurances (buildings, contents, life, mortgage payment protection).
- Service charges on a leasehold property.
Mortgage calculators can be useful to work out the total cost to run and buy your home.
What Deposit is Required for a Right to Buy Mortgage?
Many Right to Buy applicants do not have a deposit - making this scheme highly attractive to applicants who would otherwise not be able to get onto the property ladder.
If you apply to the right lender, they will consider the Right to Buy discount in lieu of a deposit, so you can borrow up to 100% of the purchase value, without needing a cash deposit.
Potentially, depending on your financial circumstances and value of the home, you might be able to borrow more, and raise funds to cover property improvement costs.
Some lenders do require a deposit, and will usually ask for 5% to 10%, although this very much depends on the policies of the lender and how closely you meet their requirements.
You cannot rent out a Right to Buy property within the first five years - however, you can rent it out after five years. Usually, you'll need approval from the landlord, and sometimes to pay a subletting charge.
In most cases, you will need consent from your mortgage lender, or to refinance on a Buy to Let mortgage.
BTL lending is usually capped at a 75% LTV, requiring a 25% deposit - although you can find lenders with much lower deposit requirements by working with an independent broker.
How Do I Calculate Affordability and How Much Does That Mean I Can Borrow?
Lenders need to work out what they think you can afford, and how risky your application is. They will look at:
- Your age.
- Credit rating.
- The property type.
- How much you earn.
- The stability of your employment.
Mortgage calculators can be useful in working out an estimate of what you might be able to borrow. However, it's worth remembering that a calculator is only ever indicative, and so it's best to consult a broker who can provide more accurate figures.
Lenders will usually offer up to four times your annual income, although some can offer five or even six times in the right circumstances.
You'll also need to provide details about your employment, how stable it is (i.e. if you have a permanent role, full-time or part-time, fixed-term contract etc.). Some lenders will include bonuses or commission in your annual salary figure, meaning you can potentially borrow a higher value.
Self-employed applicants will need to provide around three years of accounts. Again, there is flexibility available by working with an independent broker, and you can apply for Right to Buy as a self-employed person even if you haven’t been trading for long.
Can I Get a Right to Buy Mortgage with Bad Credit?
You can, although you'll need professional advice to apply to the right lenders. In some cases, you might be offered higher interest rates, or be asked for a deposit, but Revolution can negotiate the terms on your behalf.
We work with Right to Buy applicants who have had any number of credit problems, including:
- Low credit rating, or no credit score.
- Late payments and mortgage arrears.
- Defaults or CCJs.
- Debt management plans.
- IVAs.
- Bankruptcy or repossessions.
The best thing to do is to check your credit score before you apply, and understand what issues are shown, and how long ago they occurred.
Query any errors, and ensure your credit file is up to date before you start the mortgage application process.
What Types of Property Can I Purchase through Right to Buy?
Different properties receive different discounts. Non-standard properties can be trickier to mortgage since they pose a higher risk to the lender - these include:
- Unusual constructions and eco-homes.
- Listed buildings.
- High-rise flats, and flats with balcony access.
- Concrete properties and those with timber frames.
You can purchase these sorts of homes through Right to Buy, but it is vital to work with a broker who can recommend lenders with experience in non-standard property lending.
Can I get a Right to Buy Mortgage if I am Retired?
We often help applicants who have been rejected by their bank due to their age - many lenders set an upper limit, or might not consider pension income streams in their affordability calculations.
You can secure Right to Buy lending if you are retired, or nearing retirement age, by working with lenders who have more flexible later-life lending terms.
Give us a call if this applies to you, and we'll put you in touch with the best lenders.
Professional Advice with Right to Buy Mortgage Calculations
While online calculators are useful, they are only ever indicative, and can't assess things like eligibility criteria.
For help finding the most competitive Right to Buy lending, and working out what you could borrow and how much it will cost, give us a call on 0330 304 3040, or email the mortgage advisors team at [email protected] to arrange a good time to talk.
