Right to Buy
Right to Buy was a policy introduced in the early 1980’s by the Conservative government led by the late Margaret Thatcher. The Right to Buy scheme was derived to allow council housing tenants the opportunity to own their home.
- 100% funding of the discounted price
- Impaired credit
- Freehold & leasehold
- Access to full range of mortgage products
- Terms from 3 to 40 years
- Interest only or capital repayment
- First time buyers
- No early repayment charges
- Fixed rate, tracker, discount rates available
- Lending into retirement
Apply for a Right to Buy mortgage
Right to Buy gives council tenants in England and Wales who have a minimum of 5 years social tenancy the opportunity for home ownership and to purchase their council property. The 5 years tenancy does not need to be consecutive i.e. it could be 2 years as a council tenant, 2 years as a private tenant and then another 3 years as a council tenant. It just needs to total 5 years or more.
To simplify the buying process Right to Buy is available to tenants even if they do not have a deposit. The government offers discounts from the standard market value of a property, which most lenders of mortgages view as the equivalent of a deposit. Right to Buy discounts can vary depending on property type, the location and the amount of years as a council tenant. The current maximum in most areas of England and Wales are set at GBP 75,000 or 60% of the properties valuation (whichever is lower). This amount can increase to 70% for flats and the maximum discount in London is GBP 100,000.
Standard or normal market value of a property: GBP 200,000
Maximum discount (equivalent to a deposit): GBP 100,000
Purchase price: GBP 100,000
*Additional borrowing is also available. This can be used to upgrade the property or for a variety of other reasons. Should Right to Buy purchasers sell the purchased property within 5 years of ownership they will be required to repay a pro-rata amount of the discount. For example, if the discount is GBP 100,000 and the ex-tenant sells the property 1 full year after the date of purchase, they will be required to repay from the sale, 80% or 4/5 of the discount i.e. GBP 80,000. If the ex-tenant sells after 2 full years they would be required to repay 60% or 3/5 of the discount i.e. GBP 60,000.
The first step would be to contact a specialist broker of mortgages such as UK Property Finance who will help throughout the process. The broker will confirm Right to Buy eligibility, produce illustrations highlighting the availability, the cost of the mortgage and then help with the application to the council. The council normally take approximately 4 weeks to review the documentation before they instruct a local surveyor to value the property. The surveyor returns the valuation report to the council who will then produce a formal Right to Buy offer. This process normally takes another 4 to 8 weeks and the council tenant then has 12 weeks from the issue date to take up the offer or it is potentially lost. Due to the cost involved and to deter timewasters councils can have limits on the amount of Right to Buy offers per tenant. If you don’t take up the offer you could lose out on the offer or any future Right to Buy opportunity.
Almost 2 million households have taken advantage of the Right to Buy Scheme since its introduction. With substantial discounts and historically low rates on the mortgages, ex-council tenants are in many cases paying much less per month on mortgage payments than they were in rent and at the same time the ex-tenant is ensuring a more secure future. As part of the tenancy agreement a council tenant can be given notice to leave the property at any time but following purchase and provided mortgage payments are made as required by the mortgage lender, an ex-tenant can never be asked to leave the property. Purchasing the property also means that any added value improvements made to the property or normal market increases will not benefit the council but will go to the ex-tenant who is now the owner. Many ex-council tenants see Right to Buy as a perfect opportunity to leave an inheritance for their children or grandchildren.
The Right to Buy scheme has been credited with making improvements on many council estates which have changed housing unrecognisably for the better. Large swathes of private ownership within the council estates has meant that significant property and area improvements have been made by the new owners who instead of being tenants now hold a financial stake.
Some bystanders however, see Right to Buy as a counteractive system. Waiting lists for social housing have become much worse as large numbers of council properties continue to be sold and with councils now building far less properties than they are selling, this situation will only get worse. Some critics negatively credit the Right to Buy scheme with in some part creating the property bubble of the early 90’s which has made it even more difficult for first time buyers to join the property ladder. They also believe the Right to Buy a council house is unfair on first time buyers and private tenants who do not get such a helping hand into property ownership and need to save a deposit before they can get the chance to move onto the housing ladder.
Right to Buy – FAQ
There is an eligibility quiz on the official government Right to Buy portal. Check that out and answer a few simple questions to determine whether you may be eligible for an enormous discount on your home’s current market value.
Housing Association Tenants - Recent changes have affected eligibility for the Right to Buy scheme for occupants of housing association properties. Find out more and determine how much you could save by purchasing your home through Right to Buy.
UK Property Finance has extensive experience and expertise in all aspects of Right to Buy applications for council and housing association tenants alike.