Published 7 November 2022 · Last reviewed 7 November 2022 · Older article — see current rates
What is your Council Right to Buy a Discount and how do you get a Right to Buy a Mortgage with no deposit?
How much will your Council Right to Buy Discount and what is the Right to Buy Mortgage process If you are looking to buy your council house or flat the chances are you are first time buyers in need of help understanding the Right to Buy mortgage process and the Right to Buy discount you’ll be offered.
This can be daunting as suddenly there is a whole load of new words and phrases to navigate. In this article, I attempt to break down this alien language and help you on your way to buying your council house or flat and the Right to Buy Discount figures.
What is meant by a Council Right to Buy discount?
Let’s start right at the beginning what is meant by “Right to Buy discount”? This is the difference between the value if the property was sold privately on the market and the price the council are going to charge you to buy the property instead.
For example, the property could be worth £200,000 if it was traded between private owners however as you a long standing council tenant the local authority will sell it to you for £150,000. That would be a Right to Buy discount of £50,000. In the Right to Buy mortgage process the £150,000 would be known as the “Discounted purchase price”.
What is meant by public sector tenant?
The chances are if you are reading this Right to Buy article – it’s you! In all seriousness, it is someone who rents off a public sector landlord such as a local authority (council) or housing association.
How much Council Right to Buy discount will I get to buy my council house?
Based on April 2022 prices the maximum discount is £87,200 in England, apart from in London boroughs where it is £116,200. It currently increases every in April in line with the consumer price index (CPI).
The actual amount you are entitled to will depend on various factors including how long you’ve been a tenant with a public sector landlord; whether you are buying a house or flat and its value.
If you’re buying with someone else, it works on the longest servicing tenant.
What is the difference in the Right to Buy discount for a council house rather than flat?
For houses, you get a 35% discount if you’ve been a public sector tenant for between 3 and 5 years. After 5 years, the discount goes up 1% for every extra year you’ve been a public sector tenant, up to a maximum of 70% or £87,200 in England and £116,200 in London boroughs (whichever is lower).
For flats, you get a 50% discount if you’ve been a public sector tenant for between 3 and 5 years. After 5 years, the discount goes up 2% for every extra year you’ve been a public sector tenant, up to a maximum of 70% or £87,200 in England and £116,200 in London boroughs (whichever is lower).
How do I apply for a Council Right to Buy discount purchase?
You can either wait to be invited by the local authority that sends out Right to Buy Offers from time to time or you can be proactive and complete an RTB1 Application form on the internet. The timeframe for a decision on whether you’ve been approved is typically one to two months. If you’ve been declined the landlord needs to provide the reason. If you have been accepted and you’ve confirmed you want to proceed your Offer should follow within two months, however, these timeframes have been known to drift.
What is Section 125 Right to Buy Notice papers?
This is also known as S125 notice, and this is effectively your Offer from the public sector landlord naming who is entitled to purchase the Right to Buy. From a Right to Buy mortgage process point of view, most Mortgage Lenders want the applicants to match those on the S125 notice.
Why would I need a mortgage to purchase your Right to Buy?
Well, in theory, you don’t need a mortgage you could fund the purchase with cash. For most people, however, this would be impractical.
How so? Well, say the Market Value is £200,000 and Discounted Purchase Price is £150,000. You would need to pay the council £150,000 from your savings, a sizeable amount in anyone’s book.
Instead, you could take a mortgage for the full £150,000 or part of it using savings as the balance.
What is meant by a Right to Buy a mortgage?
You would have heard the phrase banded around in everyday talk but as you’ve never had one before you might not fully appreciate what a mortgage is or how it works.
A mortgage is like a loan. You are given an amount of money in return you must make monthly interest payments for the privilege. The amount of these payments will be determined by the Mortgage Product (which will have an interest rate) and whether you are simply paying the interest or paying back part of the amount you’ve borrowed at the same time.
The amount you probably going to borrow will be higher than a typical loan as such to make the payments manageable you will probably have a longer term of 20 to 25 years to repay them.
The other main difference between a mortgage and a loan is your property is at stake should you fail to keep up with the payments i.e. it could be taken away, otherwise known as “repossessed”.
There are normally hundreds, if not thousands, of Mortgage Products at any one time so you are strongly advised to speak to a professional Right to Buy Mortgage Broker, such as Niche Advice to ensure it’s appropriate for your needs and circumstances, and you are not paying over the top.
What is the maximum Right to Buy a mortgage I can get?
As a guide, you are typically looking at around 4 to 5 times your income, with most applicants around 4.5 times.
The mortgage will normally be capped at the Discounted purchase price, although there are some Mortgage Lenders which will allow a bit more for home improvements, and sometimes legal costs.
How do I start the Right to Buy mortgage process?
You could approach a bank or building society but this would give you access to only one set of Mortgage Products so they may not need your needs and circumstances, or indeed be competitive. Our recommendation would be to seek professional help from a Right to Buy Mortgage Broker.
Click on the button below If you want to buy your Council Home and need advice on the Council Right to Buy Discount and the rest of the Mortgage process.
More information on Right to Buy Discount and Processes can be found on the Government website click on the link below.
https://www.gov.uk/right-to-buy-buying-your-council-home/discounts