Right To Buy mortgage lenders in the UK
Firstly, what is Right To Buy?
Margaret Thatcher’s government introduced the Right To Buy scheme in 1980. Through significant discounts, the scheme is a popular way for council and housing association tenants to buy homes they’ve been renting.
These discounts, which increase yearly per the Consumer Price Index (CPI), max out at £116,200 in London and £87,200 in the rest of England, and about two million people have used the scheme since its introduction.
The scheme only exists in England, although Northern Ireland has the House Sales scheme, which gives its version of a Right To Buy discount. No similar system is available to public sector tenants in Scotland or Wales.
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Which mortgage lenders service Right To Buy?
High street banks and various other lenders offer a range of Right To Buy mortgages, providing loans for people with different financial statuses and histories.
Banks are much more strict than independent lenders who offer the Right To Buy scheme mortgage advice and contracts, which is why a public sector tenant will invariably go this route.
No lenders are the same, and Right To Buy mortgage lenders are no different. They will all have specific lending stipulations to which borrowers must adhere.
Types of Right To Buy mortgages that lenders offer
If you’re looking to buy your council house but perhaps have a bad credit history or are nearing retirement age, somewhere there is a Right To Buy mortgage lender who will assist you. Let’s have a look at some of the mortgage options that lenders consider:
Bad credit
A person with a poor credit history will often believe there is no way they’ll ever be in a position to buy their own home. The Right To Buy scheme has enabled those with bad credit to secure a mortgage. Many lenders will consider a public sector tenant with a poor credit rating for a Right To Buy mortgage.
While most lenders won’t be comfortable taking on a borrower with bankruptcy or repossession on their record, some may, depending on how long ago the credit issue took place.
High street banks will likely not consider applicants or borrowers with missed payments and other recent credit problems. Still, some lenders overlook older mortgages with defaults or account arrears amounts from over six months ago. There may even be some lenders who will approve borrowers with arrears from only a few months before.
Elderly or disabled people
In the past, public sector tenants reaching or in retirement, and those with disabilities, generally find it more difficult to secure mortgages, but such people should take heart. More and more Right To Buy mortgage lenders are entertaining applications from the elderly and handicapped.
Recognised banking institutions seldom agree to Right To Buy mortgages with people over 70, but an independent Right To Buy mortgage lending facility might.
Self-employed
Many lenders offer self-employed Right To Buy mortgages for council houses or housing association property tenants. They will approve applicants who show that their ongoing income is enough to cover mortgage repayments. If you work for yourself, you’ll need at least two years of accounts to prove income and a minimum of two years of tax returns.
If you have all the documentation that Right To Buy mortgage lenders require and a decent credit rating, you should have no more problems than an employed person when applying for a mortgage. A tip is to ensure that your financial documents are well-presented and easy to navigate before you apply. If your financials don’t have all the necessary evidence or it’s challenging to locate, your mortgage application won’t be as promising.
Many mortgage providers, and even some banks, consider applications from self-employed council tenants, so don’t consider yourself excluded from the Right To Buy scheme. A few specialist lenders even accept applications from those who have worked for themselves for only a short time, but you’d invariably need to show proof of future work to convince a mortgage lender.
Non-standard property
Right To Buy mortgage applications by council tenants for properties that are different to set standards, like those in thatched country cottages, towers or high-rises, are harder to get accepted. If lenders do entertain your application, they may insist on more rigid inspections before acceptance. They often request structural surveys and a more in-depth, independent valuation before contemplating a mortgage.
If your property is non-standard, it will benefit you to speak to an expert advisor or mortgage broker to help you navigate the application process. These professionals can help you find Right To Buy mortgage brokers who don’t limit features like building block heights or storeys.
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Numerous concerns
You might be a public sector tenant who falls into an almost unique group. Perhaps you are elderly, work for yourself and live in a council house with a thatched roof.
Although many mortgage brokers won’t entertain your application, this does not mean you have no hope of securing the Right To Buy mortgage. Many other Right to Buy mortgage providers deal with applications and circumstances similar to yours.
If you are in this position, you will need mortgage advice from a Right To Buy mortgage broker or somebody else with expertise in the field. At Loan Corp, we have many well-trained, experienced experts who can field your call and determine the best solution for your particular concerns.
Second-charge loans
If you’re a Right To Buy homeowner and have owned your housing association or council house for over five years, you can apply for a second-charge loan on your property.
Waiting until five years have elapsed for a second-charge loan means that you’re no longer in the pre-emption period on the Right To Buy scheme, and the council will no longer hold any rights over your ex-council home.
A second-charge loan is just a second mortgage on a property, with the property forming the security. A second-charge loan can be a practical option when a borrower is looking to raise capital. The loan can be substantial, with more than five or six times the borrower’s salary amount not unusual.
If you bought and own your property under a Right To Buy mortgage less than five years ago, you’re still in the pre-emption period of the scheme and it might be challenging to find mortgage providers willing to consider funding a second-charge loan. Still, there are certainly a few that do consider them.
Could lenders grant a joint borrower Right To Buy mortgage application?
Financial circumstances might dictate that you cannot cover mortgage costs on a Right To Buy application by yourself. It is undoubtedly an option to include your wife, partner or family members as a named party on a Right To Buy mortgage.
These named parties would generally be the same on all documentation of any mortgage deals, Right To Buy documentation and, of course, the property’s title deeds. A problem will arise if you’ve made the Right To Buy application alone but now have another party willing to co-sign for the mortgage.
Depending on the lender you’re dealing with, the lender could arrange a mortgage that includes your partner as a named sole proprietor. Although not an equal signatory, your partner would operate with a similar status to that of a guarantor. You may want to chat with one of our Loan Corp experts who can assist you and advise you about a joint borrower Right To Buy mortgage option in more detail.
Does a lender decide the discount for Right To Buy properties?
Lenders have no say in the discounts granted off property market values as council house or housing association tenants. Discounts under the Right To Buy scheme depend on property types and the time spent as a public sector tenant. A lender like Loan Corp will assist you in as many possible ways to ensure that these discounts are applied correctly.
Houses
You are eligible for a 35% discount if you’ve been a council or housing association tenant for over three years and less than five years. After five years, the discount increases by a percentage point per year of tenancy in the public sector. The maximum discount is 70%, with a maximum cap as mentioned in this article’s introduction.
Flats and maisonettes
After three years of tenancy in the public sector, you’re eligible for a 50% discount. Once you’ve spent five years as a tenant, the discount increases by 2% for every further year of your public sector tenancy until such a time you may reach 70%, which is the maximum discount.
Calculator
A Right To Buy mortgage calculator check can assist with determining the Right To Buy discount you can expect when applying for a Right To Buy mortgage. The calculator also helps you ascertain the approximate purchase price and the costs involved in purchasing your home.
These insights can be helpful before requesting a mortgage loan from a mortgage provider. All you need to do is enter the number of years you’ve been a public sector tenant, the dwelling your only or main home is, the postal code for the area you live in, and an approximate property value (your landlord will determine the actual market price). The calculator will do the rest.
You can try our right to buy mortgage calculator here.
Allow Loan Corp to assist how and where we can to make buying your Right To Buy home a reality. Our experts can help you with your loan planning and mortgage application from beginning to end. Give us a try by requesting a quotation, and one of our experienced advisors will quickly get back to you.
FAQs
I’m self-employed and was turned down for a mortgage by a lender. What should I do?
Not all lenders will treat your income the same way, so try a different one if your monthly income fluctuates too much for a particular lender to approve a mortgage. Certain lenders will consider self-employed people riskier concerning Right To Buy mortgages, meaning they will also ask for future income projections.
I’m considering applying for a second mortgage. What chance do I have?
Some lenders will offer you a second-charge loan or second mortgage. These lenders usually take out an indemnity policy against the loan, hence combatting any potential dispute with a council should the borrower sell the property during the pre-emption period. Interest rates and fees will likely be higher than usual Right To Buy mortgages.
My wife and I are of retirement age. Will anybody approve a mortgage for us?
Some lenders stipulate that one applicant must be below retirement age at application, but that doesn’t mean you have no chance of securing one.
Loan Corp can get you approved online, start now below:
https://www.ownyourhome.gov.uk/scheme/right-to-buy/
https://www.onebroker.co.uk/news/what-is-an-indemnity-policy/
https://www.loancorp.co.uk/mortgages/mortgage-affordability/
https://www.dgmutual.co.uk/the-risks-of-self-employment/
https://www.ownyourhome.gov.uk/scheme/right-to-buy/can-i-afford-it/right-to-buy-calculator/