Right to Buy mortgages can lead to more declines than standard purchases. There are a variety of reasons for this, and don’t despair just yet as we are experts in the Right to Buy mortgage field, and we may well be able to help.
In this article we discuss various reasons for Right to Buy mortgage declines and what you should do next.
Common Reasons for Right to Buy Mortgage Declines
- Affordability
This is probably the most common reason, and with the changes in November 2024 to the amount of Right to Buy discount, I can foresee it’s going to get a lot more challenging.
It’s unfair that the Local Authority Right to Buy option letters appear through post box, raising expectations of home ownership, when in reality, for some people, it is simply not a possibility. As a rule of thumb, you are generally looking at 4.5 times your annual income as a maximum mortgage. So if you are on £25,000 a year, that equates to £112,500. In some instances, it could be a little more or less, but this is a good measure.
The better news is with over 40 Right to Buy lenders at our disposal, each with their own formulas and assessments, we should be able to get you the very maximum mortgage. For example: some take the latest set of accounts for self-employed; second jobs, zero hour contracts, state benefit income. Others will ignore pension contributions or loans with a short time left to run.
We have Right to Buy Mortgage Lenders that offer mortgage terms to age 85 using employed income and 80 years using self employed. And Right to Buy Mortgage Lenders will ignore the eldest applicant’s age altogether if their income is not needed. This stretching of the term can have a direct impact on increasing affordability.
In short, there are many variables that can be moved around or certain Right to Buy Mortgage Lenders that can improve the outcome. - Property
The property quality is at the heart of mortgage lending. Mortgage Lenders, including Right to Buy Mortgage Lenders, are lending thousands of pounds at comparatively low interest rates, knowing they can repossess the property through non-payment. However, should they take back the property, they want it to be a tradeable asset, i.e. they can sell it quickly and get their money back.
In reality not all properties are built using bricks and tiles as it’s expensive. Local Authorities have in the past taken to using other cheaper materials to meet local housing demands, such as concrete, steel frames and cladding, or flat roofs, which can be unacceptable to Right to Buy Mortgage Lenders.
Blocks of flats are viewed by Right to Buy Mortgage Lenders with caution. Balconies that provide direct access to your front door are particularly disliked. Some Right to Buy Mortgage Lenders will cap the number of storeys and floor you are on, and this maximum could be even lower if there is not a working lift. When you Right to Buy papers come through they could provide details of planned improvements to the block in the foreseeable future and the cost to you. This will be seen as a liability in your mortgage assessment.
In their snobbery some Right to Buy Mortgage Lenders may look to see how many privately owned properties there are currently in the area or block of flats. It’s a better of chicken and egg as without the ability to use mortgages how can the areas be densely populated with homeowners. Low private demand is often a reason sighted for a Right to Buy mortgage decline. To save time we have access to a tool that can give an insight into the percentage of private ownership.
If the property has “Solar panels” then the ownership after the Right to Buy purchase going to be key. If the panels remain the property of the Local Authority, it is unlikely to be acceptable to the Right to Buy Mortgage Lenders.
If the property has been declined, even by multiple lenders, we may still be able to help as we have a very flexible Right to Buy Mortgage Lenders but the interest rate is likely to be much higher.
Ultimately the approval of the property will be determined Right to Buy Mortgage Lenders’ Valuer/Surveyor visit, however you should always to your prep-work use the advice of a specialist Right-to-Buy Mortgage Broker, such as Niche Advice, to check the property fits the lending policy of the Mortgage Lender in the first place. - Credit history
Right-to-Buy Mortgage Lenders will reference your credit record. As a minimum, you will probably need no missed payments or “arrangements to pay” in the last 3 to 6 months. In the case of larger problems such as defaults and CCJs, it probably takes longer.
In addition, they are likely to ask for the last Council rent statement covering a 12-month period to look for arrears and are unlikely to consider more than 2 missed in this period.
The reality is a mortgage is likely to cost you more than your council rent. So, if you are struggling to maintain your lifestyle already, then it’s probably not right for you at the moment. Bear in mind with mortgages non-payment does not have a “soft landing” you could lose your home. - Right to Buy entitlement / Who goes on the mortgage
Failure to understand who needs the Right to Buy mortgage can be a reason for decline.
If you are on the Right to Buy Offer letter, then you need to be on the mortgage.
If you are living in the property and intend to do going forwards but you are not on the Right to Buy papers there is one lender that may consider your income.
If you are married or have a child together and are not on the Right to Buy papers, the Specialist Right-to-Buy Mortgage Lenders are likely to insist you are a mortgage applicant.
- Thinking you can let the Right to Buy out
The Right to Buy Scheme is designed to provide a home and not a buy-to-let. If, after a period of living in the property if your circumstances change, such as you need to relocate because of a job, then your Mortgage Lender might provide a temporary “Consent-to-Let” arrangement,t but this is an exception. After the Right to Buy discount reclaim period, typically 5 years, then this option opens up to you.
- Borrowing more than the discounted purchase price
There are mainstream Right to Buy Mortgage Lenders that will consider money at the point of purchase for the strict purpose of home improvements. I’m also aware of one Mortgage Lender that will consider the addition of legal fees. However, beyond this it is a “no go” so do not try to use the money for other purposes such as debt consolidation or buying a new car.
Agreement for the additional money for home improvements also has to be granted by the Local Authority offering the Right to Buy, and it’s quite common for them to limit the amount.
Also, major banks such as Halifax deliver the additional money after the purchase by providing evidence that the work has actually been carried out.
Specialist Right to Buy Mortgage Lenders will decline all requests to borrow above the discounted purchase price.
- Deposit from your own resources
As well as using the discount provided by the Local Authority as your deposit, some Right to Buy Mortgage Lenders will want a contribution from your own resources.
This is more prevalent with Specialist Mortgage Lenders but can apply to some Mainstream Lenders too most notably Barclays who seek a minimum 5% deposit from you too.
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