What is the Right to Buy scheme, and how does it work?

The Right to Buy scheme allows council and housing association tenants to buy their homes at a discount below market value.

The level of discount will depend on the length of time you have lived in the property. 

One of the main benefits is that you can use the discount towards your deposit and in some cases are not required to provide any deposit at all.

For example, if a buyer is offered an £80,000 discount on a £250,000 property, the net purchase price is, therefore, £170,000. Assuming the buyer can secure a mortgage at this level they may not need any deposit at all. However, they can use their own funds towards the deposit in addition to the discount. 

How much can I borrow on a Right to Buy mortgage?

The affordability of a Right to Buy mortgage is no different to that on any other residential mortgage and will depend on your own individual circumstances.

As a rule of thumb, lenders will typically lend between 4.5-5 times your income, however, this can vary significantly depending on your income, outgoings, age and deposit. 

What if I sell my Right to Buy home? 

If you sell your Right to Buy home within 5 years of buying it, you will have to pay back some of all of the discount. The amount you pay back depends on the value at the time you sell. 

The total amount you need to pay back reduces throughout each of the 5 years, if you sell in the first year, you would be required to pay all of the discount back. If you were to sell in the second year, this reduces to 80% of the discount, then 60/40/20% in the following years. 

If, however, you transfer ownership to another member of your family, you may not be liable to repay the discount. 

Who qualifies for the Right to Buy Scheme?

The Right to Buy scheme is for local authority tenants who have been eligible tenants for at least 3 years. There is a simple quiz to check your eligibility on the gov.uk website, or you can phone the government’s Right to Buy agent service to check. To be eligible, you must own any other properties.

What’s the process if I do qualify for Right to Buy?

Firstly, check your eligibility, and if you’re eligible, you’ll need to claim the ‘notice claiming the Right to Buy’ application form, known as an RTB1 form. If you’ve been accepted, you’ll need to have your property valued by a surveyor from your local council.

The council will then confirm the discount you are entitled to and the final purchase price. A formal offer would then be issued. If you accept the offer, you will then need to look into arranging a mortgage and instructing a surveyor and solicitor. 

What’s the discount?

The discount available will depend on the value of the property. If you are buying a house or a flat and how long you’ve been a tenant with a public sector landlord. 

The discounts are capped at £87,200, except in boroughs in London where it is £116,200.  

This handy calculator will help you calculate the discount available to you. 

If you live in a house

If you are buying a house, the discount is up to 35% if you’ve been a public second tenant for 3-5 years. After 5 years, the discount goes up 1% for every extra year you’ve been a public sector tenant. This is capped at the regional thresholds as above. 

If you live in a flat

If you are buying a flat the discount is up to 50% if you’ve been a public second tenant for 3-5 years. After 5 years, the discount goes up 2% for every extra year you’ve been a public sector tenant. This is capped at the regional thresholds. 

Can I rent out my Right to Buy home and if so, how long do I need to wait to do so?

There are no legal restrictions preventing you from letting a Right to Buy property, and in theory, you could let the property out immediately following completion. However, if you have bought with a residential mortgage, you will need to obtain consent to let from the lender. They may not grant permission or have a minimum period of time; you must have lived in the property first.

How can Strive Mortgages help? 

Taking out a mortgage will likely be the single biggest financial commitment in most people’s lives, and having an experienced broker like ourselves with experience arranging Right to Buy mortgages can be of real comfort, and we’d love to see if we can help, so contact us today.