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 Money
Page > Mortgages
> Right To Buy Mortgage - UK Guide
 In a
nutshell
A mortgage that allows council tenants to
buy their home.
Best
Mortgage For
Council tenants that wish to buy the
house/flat which they currently rent.
Mortgage Type
You'll
be able to source both repayment and interest only mortgage
options and a full range of deals for a right to buy mortgage.
So, for example, you'll be able to find fixed rates, capped
rates, discounted offers, trackers and variable rates. Your
actual choice may be not be available with all lenders
however. If you do opt for an introductory deal such as this
then it will only last for a certain period (usually between
1-5 years) after which you'll revert to the original
underlying product such as a variable rate or a tracker, for
example.
Typical
Amount to borrow
The chances are that you won't
need to borrow the full value of your home with a right to buy
mortgage as most tenants that qualify for the scheme will be
given a discount on the price they have to pay for their home.
Many lenders will therefore let you borrow more than you
actually need when you take out your mortgage. In all other
cases, standard borrowing amount terms will apply - these
start at 95% of the value of your property and will vary from
lender to lender.
Deposit
In many cases
you won't actually need a deposit for a right to buy mortgage
as most consumers that take up this kind of deal will get a
discount on the price they actually have to pay. If you do
find yourself having to pay a deposit, you'll be looking at
5%+ depending on the lender you choose.
Advantages
The first
advantage here is the fact that you will be paying out your
money every month to buy your current home, rather than simply
handing over rent. Rent is often seen as 'wasted' money as
you're not buying anything for it apart from the opportunity
to live in your house/flat. With a right to buy mortgage,
you'll own the house/flat. And, you'll also probably qualify
for a discount on the value of your property. This means that
you'll pay less for it than it is worth on the market. This
can rise to up to 70% depending on how long you've been a
council tenant and what kind of property you currently rent.
It can also be capped in some areas.
What to
look out for
A right to buy mortgage will make you
liable for costs and fees that you won't have had to pay
before. For example, your council will probably only help you
with emergency repairs at the most once you own your home. You
will have to bear the cost of any repairs, maintenance work
and improvements.
If you live in a council flat and
take out a right to buy mortgage then you will also have to
pay ground rent (generally a nominal fee) and will also
probably have to pay service charges. These latter charges can
be quite high - especially if you live in an old, high-rise
type block. It'll be worthwhile checking these out before you
go ahead. If, as a council tenant, you're currently being paid
housing benefit then this will stop once you buy the property.
If you are on benefits, you'll need to assess how your
situation will change as a whole as a home owner. You may also
find that your current council rents include certain charges
such as council tax and water charges. Once you buy, you'll
have to pay for these separately. You may experience some
problems getting a mortgage from 'standard' lenders on a right
to buy basis. This really depends on the area in which you
live and the type of property you live in. Some lenders, for
example, won't give out mortgages for high-rise flat
purchases. And, even if you get a mortgage, you need to look
at the big picture - i.e. that you will be able to find a
buyer for it in the future if you decide to sell. You won't
qualify for right to buy until you have been a tenant in an
applicable situation for at least two years. And, if you do
qualify for a discount then you will have to pay some or all
of it back if you opt to sell the property within three years
of its purchase. If you're applying for a right to buy
mortgage and have done this before then any discount you
qualify for may have your original discount deducted from it.
Alternatives
If you
are a tenant of a housing association then you can take up a
similar scheme called 'right to acquire'. If you can't afford
to pay the full mortgage necessary then you can also apply for
a 'rent to mortgage' product where you buy part of the
property with the option of full purchase later on. Overall,
right to buy is probably the best option for council
tenants.
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