The Right to Buy scheme can be a useful tool to help people get onto the property ladder, however most people using the scheme will still need a mortgage to help them complete their purchase. So how does the scheme work and where do you start?
The scheme varies between the differing parts of the UK and so this article is concerned with the Right to Buy Scheme in England only. If you have an enquiry regarding Right to Buy mortgages in other parts of the UK, please get in touch.
The Right to Buy scheme enables public tenants to purchase their property at a discount from its market value. This discount is the deposit that the tenant can use towards a mortgage. For example:
Property Valued at: £100,000
Discount Received: £40,000
Purchase Price: £60,000
The above is just an illustrative example to explain how the scheme works. The first thing to do, is to check your eligibility which usually involves a conversation with your landlord.
If you want more information on your eligibility a great place to look is: www.righttobuy.gov.uk
So, you are eligible and want to purchase, what do you do next?
Important Information to Know
Being a homeowner can be rewarding but it also means you may have costs that you had not considered before, such as the maintenance on a property. In addition, there could be costs that you need to consider over and above a mortgage, for example, if you are purchasing a flat from your local authority it is likely to be on a leasehold basis and this means you will have to contribute to any service charges and improvement works.
You also need to be aware that your change in status from tenant to homeowner may impact on any benefits you either receive or may be entitled to and you should discuss this with a benefits adviser.
It is also important to know that if you purchase a property under the right to buy scheme and you intend to sell the property within the first 5 years, it is likely you will need to repay some of your discount back to the local authority.
It is important to get the mortgage right with the correct advice as it is likely to be one of the largest debts you will ever take out. Many people purchasing under the right to buy scheme also wish to take out further funds to improve the property, over and above the purchase price. This can impact on the mortgage as some mortgage lenders allow it and others don’t. If this is important to you, then it should be discussed with your mortgage advisor to ensure you get the most appropriate mortgage for you.
In addition, certain local authority properties can be more difficult to mortgage than others. There are lots of high-rise local authority properties and lots of properties constructed from concrete for example and it will be important to match your right to buy requirements to the correct mortgage lender.
This is where getting an expert can help! Whether it’s the property type, your credit history or your employment, here at Community Mortgage Services we will search across a comprehensive range of mortgages from across the market to find the appropriate one for you. We also do not charge you fees for our advice, so please get in touch today.