Right to Buy Scheme 2024
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Right to Buy Scheme 2024
Jake Stott joins us to explain the Right to Buy scheme.
Is the Right to Buy scheme still available?
[podcast recorded in April 2024]
Yes, the Right to Buy scheme is still available and there are two sections to it – the Right to Buy scheme and also Right to Acquire. They are both very similar and are available to anybody who meets the criteria.
What does Right to Buy mean and how does it all work?
Right to Buy applies where you are a tenant to the council for a certain amount of time, usually three years. From then on, you can purchase that property from the council.
The great thing about it is that the council will give you a discount on the property, and that discount can be used towards your deposit. It means you don’t have to save up a deposit.
Right to Acquire is very similar, but instead of renting from a council you rent from a housing association. The discount isn’t quite as big as with Right to Buy.
Who is eligible for Right to Buy?
You generally have to meet certain criteria. The house has to be your main home, and it has to be self-contained. You have to be a tenant renting from a public sector landlord for at least three years.
It’s a great scheme, particularly for people who are struggling to save up a deposit.
How does the Right to Buy scheme work for joint applications?
Generally, with joint applications you can include three family members. So if you’ve got perhaps a mother, a father and a son all on the tenancy agreement with the council and all three are contributing towards the rent on the property, they can all technically go on the mortgage application.
The only issue with this is that lenders generally go off the oldest applicant’s age to work out the length of the mortgage. It all needs to tie up for affordability. If you’ve got someone aged 50 on the mortgage, you might only be able to get a 20 or 25 year term.
That affordability could then be stretched, depending on where the property is in the country and house prices locally. But that’s where a mortgage adviser would guide you through the process and explain the options.
What is the process if I do qualify for Right to Buy?
First you have to approach the council or the housing association and make sure that they offer the scheme. You then fill in a Right to Buy or Right to Acquire application form. You send this over to the landlord and they either say yes or no.
It usually takes around four weeks. It can take a bit longer sometimes. If the landlord agrees to sell you the property, they’ll get the valuation done and then work out the discount you’re entitled to.
That’s when you would come to a mortgage adviser. You’d tell us the price agreed with the landlord and how much you need to borrow for the purchase.
Obviously it is a good idea to speak to an adviser right at the start of the process, to get an idea of what you can borrow. You’re not going to be way off, because we can gauge what house prices will be based on sold data in the area.
We might not know exactly how much discount the landlord will give you, but we can guide you and make sure your efforts aren’t wasted. If you meet the criteria to borrow enough money post-discount, then once your Right to Buy application is approved it’s down to the mortgage adviser to sort the borrowing out for you.
Do I need a deposit for Right to Buy?
This really depends on the mortgage lender. Some will require you to put a deposit in, some don’t. But most of the time the discount from the council or the housing association will be used as your deposit.
So if you don’t have money saved or you’ve not got the income to put some extra away, Right to Buy is a big help. Times are tough at the moment – it’s been a bit of a rough couple of years since Covid ended. That discount the council gives you as your deposit is a big step up.
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What is the discount if you live in a house or if you’re living in a flat?
Discounts usually start around 35% and can go up to 70% depending on the length of the tenancy. On flats, the discount goes up to 50%. The maximum discount you can get in England is £102,400, which depends on the house price. In London it’s slightly higher – up to £136,400. It increases every year with the Consumer Price Index.
It’s not one size fits all. When you do that application with the landlord they will give you an idea of how much the deposit is. It will depend on how long you’ve been a tenant for the flat or house and the full market value of the property. So it’s just best to do a bit of research.
Can I let my Right to Buy property?
Potentially, yes you can, but the Right to Buy scheme is for you to purchase with a residential mortgage. You would have to ask the lender for what we call Consent to Let if you wanted to rent the property out.
First you have to ask the lender whether or not it would be allowed. You’d also have to ask the council whether you’re OK to do it. So there are two parties you have to get permission from. It is potentially possible to do it, but you have to jump through some hoops.
Can the council refuse my Right to Buy application?
The council can possibly refuse it. You might not be eligible, or there might be some sort of legal dispute about the property. There might be outstanding debts related to the housing.
If you’re not up to date with your rental payments with that particular council or housing association, you could be refused the Right to Buy scheme.
What does preserved Right to Buy mean?
Preserved Right to Buy applies to ex-council homes and their tenants. It’s where the home has been sold by the council to another landlord, but it retains Right to Buy eligibility.
Perhaps the council is not your landlord any more. But when the council sold it, they reserved the Right to Buy scheme eligibility within that property. It’s something to check and do some research around.
What is Right to Acquire?
Right to Acquire is slightly different from Right to Buy, because you’re not actually purchasing from a council. Instead you’re purchasing from a housing association.
The main difference is the amount of discount you get. The maximum discount you can get on Right to Acquire is around £16,000. That’s quite a lot less than with the Right to Buy scheme. Housing associations own a large number of properties that they rent out, so it just means less deposit for the people applying.
How do I apply for the Right to Buy scheme?
The main thing is to make sure you’re eligible. If you search ‘Right to Buy’ on the government website there is a form called the RTB1 form. You fill that in, send it off to your landlord or the council and then they will come back to you. If you’re eligible they start the process.
You get the property valued and speak to a bank or a mortgage adviser to work out what you can borrow. That’s going to vary depending on your credit score and affordability.
What happens if there are delays within the process of applying for a Right to Buy scheme?
The council usually gives you a time frame. From the point of starting the application process with Right to Buy, you might have perhaps six months to purchase the property.
Within that six months you have to get your mortgage arranged, get everything sorted with the solicitors, get the searches done and compete on the property. If the time lapses, sometimes they may need to do a new valuation or you may have to start the process all over again.
It’s the same with mortgages. It’s why mortgage offers are usually valid for six months because after that the property price may have changed since it was valued.
How can a mortgage broker help with Right to Buy or Right to Acquire?
The main thing we can do is advise on the best way to go forward. We help guide you through the process and keep things moving in the right direction. We assist with paperwork you need to fill out and obviously look at the best mortgage rates possible for your particular circumstances.
If you’re applying for a Right to Buy with more than two applicants, it’s obviously more of a niche area. You might need to find a lender that’s willing to accept more than two applicants on a mortgage application.
Most high street banks do offer the Right to Buy scheme, but not all of them. So you need to do a bit of research – and even so, if you just apply to one lender, you might not be getting the best particular outcome for your circumstances.
Over a two or a five year fixed mortgage, that could cost you quite a lot of money. We’re here to help you get the best products possible for you and give you the support you need.
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