What is the Right to Buy mortgage scheme?

The Right to Buy mortgage scheme offers council tenants in England up to £84,200 (or £112,300 in London) off the market price of their council home. Here is what you need to know about the scheme.

Happy couple in new home holding keys

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Tenants across England can get up to £84,200 off the cost of buying their council home through the scheme. The maximum discount in London is £112,300 and these amounts will increase each year in line with inflation. 

Who qualifies for a Right to Buy mortgage discount?

To be eligible for the Right to Buy mortgage discount scheme you will need to have been a public sector tenant for at least 3 years; this means your landlord would have to be a council, NHS trust or housing association.

The 3 years don’t have to have been in one continuous period or just in the home you want to buy. However, the property has to be your only home and must be self contained.

You cannot apply for a council Right to Buy mortgage discount if any of the following apply:

  • The property is not your main home

  • The property is not self-contained (i.e. you share a kitchen or bathroom)

  • You have an introductory tenancy rather than a secure tenancy

  • There is a court order saying you must leave your home

  • You have an undischarged bankruptcy

  • You are being declared bankrupt

  • You owe money to creditors

Certain properties are also excluded from the Right to Buy scheme, usually if they are reserved for the elderly or for tenants who work in a specific public sector, such as firemen or the police.

However, if you live in an ex-council house that was sold to another landlord, a "Preserved Right to Buy" may still apply.

You can find out if you could buy your property through the scheme, using the GOV.UK website.

Right to Buy joint mortgages

You can apply jointly with someone you share your tenancy with, or up to 3 family members who have lived with you in the past year.

How much is the Right to Buy mortgage discount?

The maximum discount available through the Right to Buy scheme has increased to £84,200 for properties across England (£112,300 in London boroughs).

The exact amount you will get depends on how long you have been a council tenant, whether you live in a flat or house, and the value of the property you want to buy on the open market.

The maximum discount for a council flat is 70% of the market value, but the discount starts at 50% for those who have been council tenants for 3- 5 years and increases by 2% for each additional year of council tenancy up to the maximum of 70%.

The maximum discount for a council house through the Right to Buy scheme is 70% of the market value starting at 35% if you have been there between 3 and 5 years, and increases by 1% for every year you have been a council tenant.

Regardless of how long you have lived in your home, or how much it is worth on the open market, the maximum discount on offer through the Right to Buy scheme is £84,200 (£112,300 in London). The maximum amounts increase with the consumer price index in April each year.

The Cost Floor Rule

The amount of money that will be deducted from your property could be capped by the Cost Floor rule.

This rule allows your landlord, in most cases your local council, to claim back money they have spent on repairing and maintaining your property over the past 15 years from your Right to Buy discount - even if you have not lived there the entire time.

How do you apply?

If you want to benefit from the Right to Buy discount and are a qualifying tenant you can start your application by downloading and completing the RTB1 application form.

You will then need to send your application to your landlord who will have 4 weeks to tell you if you can buy your home (8 weeks if they have been your landlord for 3 years or less).

If your landlord is happy to sell you your home they will then send you an offer through a Section 125 notice. This will contain a formal valuation of your property including the price you will be expected to pay.

It will also set out details of the property, any known problems, the new Right to Buy discount rates and estimates of any charges that will be deducted from your discount.

Once you receive your Section 125 notice you will have 12 weeks to accept the offer or reject it and continue renting your home.

What if you disagree with the offer?

You can ask for an independent valuation from HM Revenue & Customs if you feel the property value has been set too high. To do this, you will need to write to your landlord within 3 months of receiving the offer to explain why you think it is too high.

How do I apply for a mortgage Right to Buy scheme?

Purchasing your home through the council Right to Buy scheme is very similar to buying a property on the open market, except the homeowner (in most cases the council) is able to offer a substantial discount on the price you have to pay.

However, this does mean that you will need to apply for a Right to Buy mortgage and put down a deposit unless you have the cash to purchase the property outright.

Right to Buy mortgage lenders

Many lenders offer mortgages specifically tailored to Right to Buy applicants, although you should carefully consider all options when looking for the best mortgage. 

Remember, if you speak to a lender, the only Right to Buy mortgages they can advise you on are their own. 

By speaking to an independent financial advisor or mortgage broker, you will receive information on a wider number of mortgage lenders. 

You can find Right to Buy free mortgage advice from the Government’s Right to Buy website.

For more help read this guide to finding the right mortgage or compare mortgages using our Right to Buy comparison.

You could also complete our mortgage broker form to speak to an independent right to buy mortgage broker in your area.

Can you use your Right to Buy mortgage discount as a deposit?

Many mortgage lenders will let you use your Right to Buy discount as your deposit, meaning you will not need to save a deposit yourself. 

However, some lenders may still expect you to put down a deposit as well.

Can I get a Right to Buy mortgage with bad credit?

You may be wondering if you can get a mortgage for Right to Buy with bad credit? The answer is: possibly. 

By speaking to a mortgage broker who specialises in advising on mortgages for those with poor credit scores you have the best chance of finding a lender that is willing to offer you a home loan. 

In the meantime, start taking steps to improve your credit rating as this will help your application further down the line. 

Can I get a Right to Buy mortgage if I’m self employed?

If you are self employed you will need to prove your income, and show at least 2 years’ worth of tax statements or company accounts signed off by an accountant. 

This is another situation where it is worth speaking to a specialist mortgage broker, as they will know which lenders are the most likely to offer you a mortgage.

Can you sell your ex-council home later?

If you purchase your home through the Right to Buy housing association you may have to repay some or all of your discount if you sell it again within 5 years.

The amount you would have to pay back depends on how long you have owned the property when you sell:

  • Less than a year = all of the Right to Buy discount

  • 1-2 years = 80% of the discount

  • 2-3 years = 60% of the discount

  • 3-4 years = 40% of the discount

  • 4-5 years = 20% of the discount

  • 5+ years = 0% of the discount

The market value of your home when you sell will also affect the amount you would have to pay back; this applies whether your property has increased or decreased in value.

For example, if your home was worth £100,000 and you got a discount of £40,000 only to sell it for £110,000 the discount would be calculated as £44,000.

So, if you sold it 30 months after purchase you would repay 60% of £44,000.

You also have to give your original landlord first refusal on the property and offer it to another social landlord in the area if you sell it within 10 years.

Right to Buy mortgage nationwide

Control over social housing is a devolved issue, meaning that the governments of Scotland, Wales and Northern Ireland have control over their own council Right to Buy mortgages schemes.

Scotland

The Scottish parliament withdrew the scheme entirely in Scotland on 31st July 2016.

You can find more information on the Right to Buy scheme in Scotland.

Wales

Right to Buy Wales ended for all Council and housing association tenants on 26 January 2019. For more information, visit the Welsh Government website.

Northern Ireland

While the Northern Ireland Right to Buy scheme allows Housing Executive and housing association tenants to purchase their home at a discount, the maximum discount available in Northern Ireland is £24,000.

Most of the other rules and regulations regarding the scheme are the same as in England, with tenants having to have been a tenant for a minimum of 5 years to qualify.

For more information and details of how to apply, visit the Housing Rights Service website.

If you're a first time buyer or looking to move house or remortgage, we can help you find the best mortgage deal to suit your needs.