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Right to buy is a Government scheme which enables council tenants to purchase their homes at an often considerable discount. This discount can then be applied to the purchase price and used instead of a deposit by the person applying for a right to buy mortgage. 

Right to buy mortgage discounts

The size of the discount offered on a right to buy property depends on the type of property that is being sold and how long the would-be homeowner has lived there. 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 by 1% for every extra year you’ve been a public sector tenant, up to a maximum of 70% – or £80,900 across England and £108,000 in London boroughs (whichever is lower).

For flats, a 50% discount is available if you’ve been a public sector tenant for between 3 and 5 years. After 5 years, the discount goes up by 2% for every extra year you’ve been a public sector tenant, up to a maximum of 70% – or £80,900 across England and £108,000 in London boroughs (whichever is lower).

Eligibility for right to buy

In order to be eligible for right to buy, you need to have been a tenant in public sector housing for at least three years, although you don’t have to have lived in the same property the entire time and your tenure doesn’t have to be continuous. People who have been living together for at least twelve months as joint tenants can apply for joint ownership. Joint ownership is only allowed if both tenants are eligible. 

Getting a mortgage under the right to buy scheme

Tenants wanting to purchase their council house will in many cases need to take out a right to buy mortgage, which can be more difficult than getting approved for a traditional mortgage as some lenders don’t want to accept the discount in lieu of a deposit. In these cases, tenants will need to find the money for a cash deposit or an alternate lender. Each lender will set the amount required for a deposit; there is no maximum deposit for right to buy. 

It’s important to remember that if you purchase a right to buy property, if you sell it on within five years you will probably have to pay back some, if not all, of the discount you received as a council tenant. If you sell the property within ten years, you won’t need to pay back any of your discount but you are required to contact the original landlord to see if they want to buy it back from you. If they don’t, then you can put it up for sale on the open market. 

Can I get a right to buy mortgage with bad credit?

Where a tenant has bad credit, this can also impact their ability to get approval for a mortgage under the right to buy scheme, making it more difficult but not impossible to get any type of mortgage, including right to buy. If you are struggling to find a lender, you might want to use the services of a mortgage broker who specialises in right to buy. 

What does a right to buy mortgage broker do?

Mortgage brokers are financial advisors who specialise in helping council house tenants access the right to buy scheme, finding the right mortgage for them even if they have bad credit. They carry out affordability assessments, walk individuals through the application process and search for the best right to buy mortgage deals based on each person’s personal circumstances. 

A right to buy mortgage broker can be independent, meaning they work with all lenders, work with a group of lenders, or work with only one lender. As finding a mortgage under the right to buy scheme can be more difficult than finding a traditional mortgage, potential homeowners may be best placed working with a mortgage broker that is not tied to only one or two lenders but works with tens, if not hundreds of lenders. 

Mortgage broker fees

Mortgage brokers make their money by charging you or the lender a fee. These fees tend to be one-off charges that cover all the services they offer including advice, recommendations on mortgage deals and support. If the mortgage broker is going to charge you a fee, they must tell you in advance and this will be listed in the Key Facts Illustration document, which they will provide to you before you agree to work with them, so you can make an informed decision. 

The benefits of a right to buy mortgage broker

Working with a mortgage broker when you are buying a right to buy property has a number of benefits:

  • They work for you: They must work in your best interests and have a responsibility to provide you with the best advice when recommending a right to buy mortgage deal. Any advice they give you should be unbiased and, if you feel it isn’t, you have right of recourse by contacting the Financial Ombudsman Service. 
  • They are qualified and regulated: In order to give advice, a mortgage broker must have their qualifications approved by the Financial Conduct Authority (FCA), who also regulate the industry. A mortgage broker’s qualifications cover the mortgage market, law and regulations.
  • They are industry experts: A mortgage broker for right to buy has one job - to find you the best mortgage deal possible, regardless of your circumstances and credit history. They can only do this if they know the industry inside out. Check how long your mortgage broker has worked in the sector. The longer it is, the more relationships they will have had a chance to build up with lenders, meaning you are more likely to get a better deal.
  • They reduce the likelihood of your being turned down for a mortgage: Because mortgage brokers complete an affordability assessment and a full review of your credit history before looking for mortgages for you, they are unlikely to have you apply for a mortgage they don’t think you’d be approved for. They are also able to negotiate on your behalf with lenders, potentially getting you a better deal than you could agree on your own. 

Finally, your mortgage broker can provide related financial advice, for example on buildings and contents insurance, helping you find a good deal on these too and saving you even more money in the long term.