Although you can add up all of your public sector tenancies, you can only use Right to Buy to buy the property that you currently live in.
If you want to live elsewhere, there are a variety of other schemes that can help you buy your first home.
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YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
What is the Right to Buy scheme?
The Right to Buy scheme is a government home ownership scheme available in England. If you’re a council tenant, then it offers you the chance to buy your rented home at a substantial discount on the market value of the property.
There are a few criteria you’ll need to meet in order to be eligible for the scheme. There also may be restrictions depending on your property type, or where it’s based.
How does Right to Buy work?
If your landlord is classed as public sector, and your home is based in England then you may have the chance to buy your home at a reduced cost, once you’ve been a public sector tenant for three years.
Public sector landlords are usually the local council, however, there are also some NHS-owned properties that may also qualify for the scheme. If you’re a housing association tenant, there is a similar scheme known as Right to Acquire, which may be available to you.
If you’re eligible, you’ll be given the opportunity to buy your home at a percentage reduction, depending on how long you’ve been a public sector tenant in total. This doesn’t need to be in a row, so any periods spent in this type of accommodation can be added together.
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Are you eligible for the Right to Buy scheme?
If you qualify for each of the below criteria, you should be able to make use of the scheme:
You must be:
18 or over, a first-time buyer, able to afford the fees and interest payments or have been a public sector tenant for at least 3 years (not necessarily in a row).
You must not:
Own or have owned a home or residential land in the UK or abroad, have had any form of sharia mortgage finance or have any repossession orders against you.
The property must be:
In England, your main and only home, not sheltered housing for elderly or disabled people or not due to be demolished.
How much is the Right to Buy discount?
The size of your discount depends on the total amount of time you’ve been a public sector tenant, the type of property (house or flat) and where it's based, as the discount limit is higher in London than the rest of the country.
Your home will be given a market value evaluation by the scheme, and the discount will be awarded as follows:
If you live in a council house
Three to five years as a public sector tenant - 35% discount
More than five years as a public sector tenant - 35% +1% per additional year as a tenant, up to a maximum of 70%)
If you live in a council flat
Three to five years as a public sector tenant - 50% discount
After five years as a public sector tenant - 50% +2% per additional year as a tenant, up to a maximum of 70%)
Whilst the maximum percentage discount available is 70%, the value of the discount is capped, meaning that the maximum you can possibly receive as a discount is £96,000 across England and £127,900 in London boroughs, no matter how long you’ve been a tenant for.
Can you use the Right to Buy discount to pay your deposit?
Aside from the large discount, one of the greatest benefits of the Right to Buy scheme is that most mortgage lenders will allow you to use your discount in place of a deposit, meaning you won’t need to save as much.
Some lenders will expect you to contribute a minimal deposit alongside your discount, depending on their terms, but a mortgage broker might be able to find you one that doesn’t require this.
When buying a house with a traditional mortgage, the size of the loan is based on loan to value (LTV). This represents the percentage you need to borrow compared to the full cost of your home. A larger deposit would lower your LTV to help you to access lower interest rates.
This means that the more substantial your Right to Buy discount, the less you’ll need to borrow and the lower your mortgage interest rates are likely to be, assuming your mortgage lender will accept the discount in lieu of a deposit.
For example, if your house is worth 120,000 and your discount is 50%, you only need to borrow £60,000 at 50% LTV, which should offer you very competitive rates of interest.
That said, even without a deposit to fork out, there are other upfront costs associated with house purchase that you will need to have available, such as those for land surveys and conveyancing.
Useful things to consider for the Right to Buy scheme
Are any properties excluded from the Right to Buy scheme?
Although you can add up all of your public sector tenancies, you can only use Right to Buy to buy the property that you currently live in.
If you want to live elsewhere, there are a variety of other schemes that can help you buy your first home.
How to find houses that are part of the Right to Buy scheme?
The right to buy scheme allows you to buy your own council house (or similar public sector landlord owned property) only, so you won’t need to look for a suitable property. You are unable to purchase other council properties.
Can you use the Right to Buy scheme if you have bad credit?
Having bad credit shouldn’t limit your access to the scheme itself, but depending on the severity of your credit issues, it could affect your ability to get a mortgage. This article on bad credit mortgages should help to clarify whether you will be accepted, but if you need further clarity, a mortgage broker might be able to help you.
You might not be able to use the scheme if you are in debt with your landlord, however, because the acceptance criteria for the scheme requires you to be up to date with your rental account.
Can you use the Right to Buy scheme with your partner?
Yes, you can use the Right to Buy scheme with a joint mortgage, however, the other mortgage applicants would usually need to be people that you share a tenancy with in the property you’re buying, unless you’re using a guarantor mortgage.
Do you pay stamp duty on Right to Buy properties?
It’s highly unlikely that you will need to pay stamp duty on a Right to Buy property, as you will be a first-time buyer by default - they don’t allow previous home owners to use the scheme.
As a first-time buyer, you can buy a home up to the value of £425,000 home without the need to pay any stamp duty. As council properties values are unlikely to exceed this limit, the possibility of owing stamp duty is very slim. It may possibly be required in the Greater London area, where property costs are higher generally.
How do I apply for the Right To Buy scheme?
You can start the Right to Buy process and get a valuation from your landlord before you begin looking for a mortgage. Once you’ve been through the application process you will receive an offer from your landlord which will show how much they think you should pay and how the discount was calculated.
You will then have 12 weeks to approve or reject the offer, and reserve the right to request an independent valuation if you think that the cost of your home has been overvalued. Once you are happy to go ahead with the purchase, it’s time to look for a mortgage.
Useful things to consider for the Right to Buy scheme
Are any properties excluded from the Right to Buy scheme?
How to find houses that are part of the Right to Buy scheme?
The right to buy scheme allows you to buy your own council house (or similar public sector landlord owned property) only, so you won’t need to look for a suitable property. You are unable to purchase other council properties.
Can you use the Right to Buy scheme if you have bad credit?
Having bad credit shouldn’t limit your access to the scheme itself, but depending on the severity of your credit issues, it could affect your ability to get a mortgage. This article on bad credit mortgages should help to clarify whether you will be accepted, but if you need further clarity, a mortgage broker might be able to help you.
You might not be able to use the scheme if you are in debt with your landlord, however, because the acceptance criteria for the scheme requires you to be up to date with your rental account.
Can you use the Right to Buy scheme with your partner?
Yes, you can use the Right to Buy scheme with a joint mortgage, however, the other mortgage applicants would usually need to be people that you share a tenancy with in the property you’re buying, unless you’re using a guarantor mortgage.
Do you pay stamp duty on Right to Buy properties?
It’s highly unlikely that you will need to pay stamp duty on a Right to Buy property, as you will be a first-time buyer by default - they don’t allow previous home owners to use the scheme.
As a first-time buyer, you can buy a home up to the value of £425,000 home without the need to pay any stamp duty. As council properties values are unlikely to exceed this limit, the possibility of owing stamp duty is very slim. It may possibly be required in the Greater London area, where property costs are higher generally.
How do I apply for the Right To Buy scheme?
You can start the Right to Buy process and get a valuation from your landlord before you begin looking for a mortgage. Once you’ve been through the application process you will receive an offer from your landlord which will show how much they think you should pay and how the discount was calculated.
You will then have 12 weeks to approve or reject the offer, and reserve the right to request an independent valuation if you think that the cost of your home has been overvalued. Once you are happy to go ahead with the purchase, it’s time to look for a mortgage.
Right to Buy mortgage FAQs
Do you have to pay a deposit when applying for the Right to Buy scheme?
Typically no, as most lenders are happy to use your discount in lieu of a deposit. Some lenders will require a deposit, however, and in either circumstance, you still need to save enough money to cover the other fees that come with buying a home.
Where in the UK can I use Right to Buy?
In mainland UK, only England still offers this scheme, although there is a similar scheme available in Northern Ireland for housing executive tenants.
Can you sell your Right to Buy home?
Yes, but you would have to pay back some of your discount if you sell it within five years of buying it. If you sell it within 10 years, it has to be offered back to the landlord before private buyers.
Can I get a Right to Buy mortgage if I am self employed?
Being self-employed won’t make you ineligible for the scheme, or to get a mortgage, so long as you’re able to adequately prove your income.
Can I buy any council house with a Right to Buy mortgage?
No you can’t. You only have the option to buy the property that you currently rent.
Can I use Right to Buy if I’m a housing association tenant?
There is a very similar scheme available to housing association tenants, known as the Right to Acquire scheme. The discount available is not as large, but it can still offer a more affordable path to home ownership.
Can I rent out my Right to Buy property?
Not really, as the scheme was introduced to help tenants buy a residential home of their own. You’ll also need to consider that residential mortgages will usually have a clause preventing you from renting out your home, as you need a Buy to Let mortgage in order to do this, and these are not offered to Right to Buy applicants.
Can I remortgage my Right to Buy property?
Yes, you can remortgage your Right to Buy property. However, the discount clawback period (the first five years when you would have to repay if you sell it) should be considered, as there may be a charge from the public sector landlord.
What are the negatives of the Right to Buy scheme?
From a personal perspective there are very few negatives to the Right to Buy scheme. Although at a societal level, it has caused a dramatic reduction in the availability of social housing for those who need it.
Something to be aware of is that due to the relatively low value of council properties when compared to other homes, it can be fairly easy to fall into negative equity (where you owe more than the value of the property) if the market crashes and house prices fall.
Ex-council properties can also be more difficult to sell than other types of property, which can make it difficult to move if and when you decide to do so.
Can your Right to Buy application be refused?
You can be refused access to the scheme if you do not meet the required criteria.
If your landlord refuses your application they must provide objective reasons, which you have the right to appeal against, should you disagree.
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