Mortgages Guide | Mortgage Help Product Information

TheMoveChannel.com | Right To Buy Mortgages

Introduction

Right to buy mortgages are for use by public housing tenants who wish to purchase their property under the Right To Buy Scheme. Public housing tenants are people who rent their property from the local council, a non-charitable housing association or a housing action trust. The vast majority of Right To Buy sales are of local authority properties.

The Right to Buy scheme was first introduced in 1980, with the main aim of offering everyone the opportunity to own a decent home and so promote social cohesion, well being and self-dependence. The Right to Buy Scheme has since helped nearly 1.5 million council tenants in England to realise their aspirations to own their own homes, with ongoing sales under the scheme now running at around 40,000 a year.

The Right To Buy scheme enables tenants to buy their homes at a discount price, provided that they have been living in their home for two years and meet the other qualification criteria. The RTB scheme is open to virtually any secure tenant who can afford to buy with the exception of dwellings occupied in connection with their employment and housing specially provided for the elderly and (in certain cases) the disabled.

There are two options available under the right to buy:

1. You can buy your home by paying the full purchase price at once with discounts ranging from 32% to 70% dependent on how many years you have spent as a public sector tenant and subject to a maximum discount limit for the area you live in.

  • Houses: The discount after two years is 32% with an additional 1% for every extra year up to a maximum of 60%.
  • Flats: The discount after two years is 44% with an additional 2% for every extra year up to a maximum of 70%.

There has always been a cash limit on Right To Buy discounts, but new limits came into effect on 11 February 1999, affecting all applications made by tenants on or after that date. The changes were made in order to ensure that the scheme provided better value for money for taxpayers, as well as still offering generous discounts to purchasers. Subject to the cash limit, tenants are still eligible to claim up to 60% in discount off the market value of their house and up to 70% off a flat depending on the number of years they have been a public sector tenant. For anyone who applies after 10 February 1999, the maximum cash limit on discount is:

  • £38,000 if you live in London or the South East
  • £34,000 in the Eastern Region
  • £30,000 in the South-West
  • £26,000 in the North-West or the West Midlands
  • £24,000 in Wales, the East Midlands or Yorkshire and the Humber
  • £22,000 in the North-East

2. You can use the Rent To Mortgage scheme if you want to buy your home, but can't afford to pay for it all at once.

Further details on both schemes can be found in the booklet Your Right to Buy your Home. It is strongly recommended that you read this booklet before applying for the Right to Buy. It can be obtained either through your landlord or by phoning the number below.

How to Apply

This is a brief description on how to apply. For further details please refer to pages 27-35 of the government help booklet 'Your right to buy your home', available from The Housing Corporation.

  • First make sure you have read the booklet Your right to buy your home.
  • If you consider that you have the right to buy then the next step is to fill in form RTB1 which once again can be obtained through your landlord. This form needs to be returned to your landlord.
  • Your landlord will then send you a response notice RTB 2 which will tell you if you have the right to buy or not.
  • If you have the right to buy then your landlord will send you a Section 125 notice which tells you, amongst other things, the price you must pay less discount and the terms and conditions of the sale.
  • Arrange the mortgage and carry on the purchase as with any other property transaction

You can use the mortgage finder quote engine on this site to find your right to buy mortgage.

Other Home Ownership Schemes

If you do not have the Right to Buy then you may wish to explore these other schemes which can help you make the move into home ownership:

  • Right to Acquire - This scheme was introduced in the Housing Act 1996, and gives certain tenants of Registered Social Landlords (e.g. housing associations) a statutory right to buy their home at a discount, generally between £9,000 - £16,000 depending on the local authority area. It only applies to RSL properties built or purchased with public funds or transferred from a local authority after 1 April 1997, subject to certain exceptions. Eligible tenants must have spent a total of two years as a public sector tenant. The discount is funded by a grant from the Housing Corporation. For further information on the scheme contact your RSL.
  • Voluntary Purchase Grant Scheme - The Voluntary Purchase Grant Scheme (VPG) was introduced in April 1996. Tenants of Registered Social Landlords (RSLs) in properties built before 1 April 1997 who do not qualify for the Right to Acquire may be able to buy the home they rent at a discount. The scheme does not apply to all tenants, as it is up to the RSL whether it takes part in the scheme and some properties may be excluded.
  • Cash Incentive Scheme - The objectives of the Cash Incentive Scheme are to release local authority accommodation for letting to those in housing need and to encourage owner occupation. The scheme works by the payment of a grant to a tenant to assist them buying a property in the private sector. It is up to each local authority to decide whether to run a CIS scheme and tenants have no mandatory right to a grant. The size of grant payable is set by local authorities themselves, but must be within parameters set by the Department - up to 80% of the average Right To Buy discount for London, South East and Eastern regions and £10,000 elsewhere. All grants must be means tested.
  • Starter Home Intiative - This SHI was one of a number of proposals included in the Housing Green Paper in recognition of the difficulties faced by key workers on low income when purchasing a house in high demand, high price areas. The Starter Home Initiative is expected to help around 10,000 key workers, particularly nurses, teachers and the police to buy homes in urban and rural areas where high prices would otherwise prevent them from living in or near to the communities they serve.

In addition, there are a number of shared ownership schemes such as the Homebuy scheme, which are outlined in the next section.