Right to Buy Mortgages

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Right to Buy Mortgages

A Right to Buy mortgage may be an option for council house tenants who have been living in their property for two or more years.

In many cases, the monthly mortgage repayments are cheaper than the monthly rent, therefore a Right to Buy mortgage could potentially free up capital to cover home improvements or for debt consolidation.

According to Right to Buy legislation, the property is purchased at a discounted rate rather than at the open market value making it a favourable option for council house tenants.

A right to buy mortgage is a mortgage taken out when a person (often the occupant) buys their house from the council. Often this is at a discounted rate, proportional to the length of occupancy.

Additionally the legislation states that if the property is sold within a three year time frame, the seller may be liable to pay back a proportion if not all of the discount they received.

In order to establish the exact discount that a council house tenant is entitled to they must contact the local authority they are currently renting from.

Am I eligible for Right to Buy?

The Right to Buy mortgage is a government scheme set out to give long standing council house tenants the opportunity to purchase the council house they reside at a discounted rate. Council house tenants must have been living in the property for a minimum of two years, with any discount being proportional to the length of residence in the property.

To establish if a property eligible for the scheme and the exact discount a tenant can receive they must contact their local authority.

Typical amounts to borrow

In the vast majority of right to buy cases, the tenants will receive a discount and will therefore not need to borrow the full market value of the property. Some lenders however will sell you a mortgage for the market value rather than the right to buy value therefore freeing up capital which may be used for debt consolidation or home improvements.

In other cases, for example those not entitled to a discount, standard borrowing amount terms will be valid, which usually means the home owner can borrow anything from 95% of the property’s value, this will be slightly different depending on the lender.

Maximum mortgage

Many right to buy mortgages will lend up to 95% or 100% of the right to buy price as the loan is calculated on the open market valuation of the property for example this means if a tenant was to purchase a council house with an open market value of 100,000 pounds and  are entitled to a 25% discount  the right to buy price would be £75,000 pounds therefore the mortgage provider would regard your purchase as being on a 75% loan to value.