Everything you need to know about getting a Mortgage for Right to Buy Council Properties criteria on Income | High rise blocks |CCJs | Defaults | Deposits | Age requirements and the process.
This is an insight into the common questions that arise when seeking a Mortgage for Right to Buy Council Properties.
The discount offered on a Right to Buy can be very attractive, however even then it’s unlikely you will be able to pay the balance outright without the help of a mortgage.
At Niche Advice we know when the Right to Buy notices go out from the local authorities to expect a flurry of interest in mortgages. The discounts are very enticing and appeal not only to Mum and Dad but their children in terms of legacy. With property prices sky high you are unlikely to ever get such a bargain. However, what the council often fails to appreciate is even though their terms are great purchasing the property can still be out of reach unless the tenant is able to qualify for a mortgage.
Can I get a Right to Buy Mortgage? Frequently asked questions.
- How much do I need to earn to get a Right to Buy Mortgage?
Mortgage Lenders normally lend between 3.5 to 5 times the applicant(s) income, however this can reduce dramatically if are nearing state retirement age or you have over two financially dependent children. Each Lender has their own rules.For example: Barry is self employed on £20,000 and Wendy works partime on £11,500.Lender A allows 4 times joint income, so they could borrow £126,000.
Lender B allows 4.5times joint income, so they could borrow £141,750.
- Can pension income be used to get a Right to Buy mortgage?
Yes, pensions and annuities – private or state funded can be used. Bear in mind though that the income multiple rules in (1) above would apply. Generally Lenders do not like lending beyond the age of 70 years, but there are exceptions that will allow terms much longer than that.
- Can my son or daughter be guarantors so I can get a Right to Buy mortgage?
Unlikely, Mortgage Lenders would expect the applicant(s) to be able to afford the mortgage their own right. The only time they would consider outside support with the mortgage payments would be if you are on a clear career path to earn more money to support the mortgage on your own in the foreseeable future. For example, you were a trainee accountant.
- My daughter and son live with me can they go my Right to Buy mortgage?
Yes, provided they are on the Right to Buy purchase papers. If they aren’t then they can’t. If they have been living with you then you could speak to the local authority to see if their names could be added to the Right to Buy papers.
- My son / daughter is on the Right to Buy papers can you base the mortgage term on their ages’ rather than mine?
Yes, the Mortgage Lender choice is minimal but there are options.
- I have a county court judgement (CCJ) can I get a Right to Buy mortgage?
Quite possibly. The Mortgage Lender rules are relaxing all the time for past and current credit issues. It will depend on the amount(s) and when they occurred. In this instance it is very advisable to speak to a Mortgage Professional, such as Niche Advice Limited.
The interest rates are likely to be higher to reflect the added risk of non-repayment to the Mortgage Lender. It should however be remembered not to lose sight of the bigger picture – the discount being offered by the council.
- I have a default(s) can I get a Right to Buy mortgage?
Please see the answer in (6) as this applies.
- I have been behind in rent can I get a Right to Buy mortgage?
Unlikely, the rent payments will be cheaper than the mortgage is likely to be. Non payment of a lower figure suggests a potential issue with repayment. It is therefore unlikely that any Mortgage Lender will look at rent arrears that have occurred in the last 12 months.
- I have been bankrupt can I purchase my Right to Buy with a mortgage?
Yes, however you will need to have been discharged for 2 to 3 years, and much longer if the bankruptcy included a repossession (voluntary or otherwise). In this instance it is very advisable to speak to a Mortgage Professional, such as Niche Advice Limited.
- My flat is in a high rise block will anyone lend to me on a Right to Buy basis?
Potentially, the key factors are: the number of existing flats / maisonettes that are already privately owned in the block; whether there is deck access; working lifts; and construction type. In this instance it is very advisable to provide a postcode and as much information as you have on the flat to a Mortgage Professional, such as Niche Advice Limited.
- Do I need to put in a deposit from my own resources to get a Right to Buy mortgage?
Depends, each Lender has their own rules. Some do not want deposits others stipulate 10% of the discount purchase price is paid.
- Can I borrow above the discounted purchase price on a Right to Buy mortgage?
Potentially, again it depends on the Mortgage Lender. If they do allow you this is normally limited to 75% of the open market value for the purpose of home purchase and home improvements.For example: Maggie lives in a council house worth £100,000. She has been offered a discount of £60,000 if she excised her Right to Buy. At the same time she wants to put in new windows costing £15,000.Open Market Value £100,000
Discounted purchase price £40,000
Plus £15,000 for widows
Total borrowing £55,000£100,000 x 75% would allow her to borrow up to £75,000. She only wants £55,000 so she is well within the limit.
- Can I get a second mortgage on a Right to Buy property?
Yes, if you have a mortgage already but need to borrow more then a second charge is possibility, however in this instance it is very advisable to speak to a Mortgage Professional, such as Niche Advice Limited.
For more information on getting a Mortgage for Right to Buy Council Properties complete the online enquiry form or call 020 7993 2044.
Author: Payam Azadi
Payam Azadi is a partner at Niche Advice who are whole of the market Independent Finance Brokers In London. His role is very much focused on Property financing both on residential and commercial lines.