Right To Buy Mortgage Scheme
How does it work?
The Right to Buy scheme currently exists for council tenants to buy their properties at a big discount. A new scheme has also been piloted to extend the right to buy to housing association tenants. With plans to extend the pilot further, this guide explains the existing right to buy rules for council tenants, how it's being extended to housing association tenants and what happened with the pilot scheme.
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What is Right to Buy?
Under the current rules, you can apply to buy your council home if:
- It's your only, or main home.
- It's self-contained, ie, you don't share any rooms (including kitchen, bathroom and toilet) with people outside your household.
- You're a secure tenant (there's a legal contract between you and the landlord).
- You've had a public sector landlord (eg, a council, housing association or NHS trust) for three years (it doesn't have to be three years in a row).
- You have no legal issues with debt
Is the scheme available throughout the UK?
The full scheme is only available in England.
If you live in Scotland, the Right to Buy scheme has been abolished completely, while Right to Buy was also phased out in Wales in January 2019.
In Northern Ireland, secure Housing Executive and housing association tenants still have a Right to Buy – the maximum discount you can receive is £24,000. The amount of discount you get depends on how long you've lived in the property and how much of the property you're buying.
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Right to Buy to be extended
Under the current Right to Buy rules, you can only buy your property as a housing association tenant if it was previously owned by the council and transferred to a housing association, or built or bought by a housing association after 31 March 1997 – the latter is known as 'Right to Acquire'.
But the discounts available on a property through Right to Acquire are not as big as under Right to Buy. The maximum available discount is £16,000 through Right to Acquire, as opposed to £84,200 (£112,300 in London), through Right to Buy.
Extending Right to Buy to all housing association properties means these tenants will enjoy the same discounts as people qualifying under the current Right to Buy rules, helping to level the playing field.
It is understood that the same discounts and process of buying and selling as explained below will apply under the extension of the scheme.
If you can't wait until Right to Buy is extended and you'll get a bigger discount on your property, you may be able to exercise your Right to Acquire.
Tenants who lived in one of the local authority areas listed in the table below, were able to form part of the first pilot.
To be eligible you had to have lived in one of the housing association areas listed below and have been a public sector tenant for at least 10 years.
We're currently waiting to hear more details of an extended pilot, which was first announced in the Autumn Statement in 2016, but which was delayed by the General Election. As soon as we know more, we'll update this guide.
Housing associations in the pilot
|HOUSING ASSOCIATION||LOCAL AUTHORITY AREAS|
|Liverpool City Council
Halton Borough Council
Knowsley Metropolitan Borough Council
Sefton Metropolitan Borough Council
St Helens Metropolitan Borough Council
Wirral Metropolitan Borough Council
|Saffron||South Norfolk District Council|
|Sovereign||Cherwell District Council
West Oxfordshire District Council
Vale of White Horse District Council
South Oxfordshire District Council
|Thames Valley||Guildford Borough Council
Hart District Council
Runnymede Borough Council
Rushmoor Borough Council
Woking Borough Council
What's the discount?
The amount of discount you get if you go through the Right to Buy scheme depends on whether you live in a house or a flat:
If you live in a house...
You get a 35% discount if you've been a tenant for between three and five years.
After five years, the discount goes up by 1% for every extra year you've been a tenant, up to a maximum of 70% – or £84,200 across England and £112,300 in London boroughs (whichever is lower).
If you live in a flat...
You get a 50% discount if you’ve been a tenant for between three and five years.
After five years, the discount goes up by 2% for every extra year you’ve been a tenant, up to a maximum of 70% – or £84,200 across England and £112,300 in London boroughs (whichever is lower).
So for example, someone who has been a tenant for 10 years could buy a £100,000 flat for just £40,000 – using a 60% discount.
To work out how much of a discount you could get, use the Right to Buy calculator.
How does it work in practice?
You'll need to fill in an RTB1 application form. Follow the link to the form and it tells you all the information you'll need to fill out the form and send to your landlord.
If your landlord agrees to sell, its offer will tell you:
- The price they think you should pay for the property and how it was worked out.
- Your discount and how it was worked out.
- A description of the property and any land included in the price.
- Estimates of any service charges (for a flat or maisonette) for the first five years.
- Any known problems with the property's structure, eg, subsidence.
You have 12 weeks after you get your landlord's offer to tell it if you want to buy the property. Once this time is up, your landlord will then send you a reminder if you haven't replied to the offer. You have 28 days to reply to it, or the landlord could drop your application. Don't worry, you can pull out of the sale and continue to rent at any time.
If you disagree with your landlord's offer and think it has set your home's market value too high, you have to write to it within three months of getting the offer and ask for an independent valuation. A district valuer from HM Revenue and Customs will then visit your property and decide how much it's worth. You have 12 weeks to accept its valuation or pull out of the sale.
Your landlord must complete parts of your Right to Buy application within four weeks. You could get a reduction in the sale price if it doesn't complete the application in time. To do this you have to fill in the 'Initial notice of delay' form (RTB6) and send it to your landlord.
Your landlord must then either move the sale along within one month or send you a 'counter notice'. The counter notice will say that it has already replied, or explain why it can't speed things up.
If your landlord doesn't reply within a month of getting the RTB6, fill in the 'Operative notice of delay' form (RTB8). This means any rent you pay while you're waiting to hear from your landlord could be taken off the sale price. You can do this each time your landlord is late getting back to you.
If you do decide to buy, ultimately you're responsible for how you finance buying your home – your landlord can't arrange this for you. This means you'll have to go through the same process of applying for a mortgage as anyone else buying a property without the Right to Buy scheme.
Buying a property is a big decision and not something that should be taken lightly. Consider all the costs, not just the mortgage repayments. You'll have additional costs and responsibilities you may not have had as a tenant, such as repairs and maintenance.
Don't forget general living costs when working out what you can afford (food, bills etc).
Plus, if you buy a flat, you'll probably be a leaseholder, and will have to pay a service charge to the housing association/council for maintenance of the building and surrounding area. Also, you won't be eligible for housing benefit if you become a homeowner.
Don't forget to think about the one-off costs too – such as stamp duty, a survey and solicitor's fees. For a list of all the fees, see our What fees will I pay? guide. Also for help getting a mortgage see our First time buyers' mortgage booklet.
What if I want to sell the property? How much is it worth?
You can sell the property, but it comes with some caveats. It's not as easy as buying it with a big discount and then being able to sell it off whenever you like and to whomever you like.
If you sell the property within the first 10 years of buying it through Right to Buy, then you first have to either offer it to your old landlord or another social landlord in the area. You will have agreed to this in the paperwork you signed when you originally bought the property off the landlord.
If the landlord wants to buy the property, it should be sold at the full market price agreed between you and the landlord. If you can't agree, a district valuer will say how much your home is worth and set the price.
The landlord has eight weeks to respond. If they don't get back to you, then you can sell it to anyone after this time.
If you sell your house within five years
If you sell the property within the first five years, you'll also have to pay back some, or all, of the discount. After that, you don't have to pay anything back.
You'll have to pay back all of the discount if you sell within the first year. After that, the total amount you pay back reduces to:
- 80% of the discount in the second year.
- 60% of the discount in the third year.
- 40% of the discount in the fourth year.
- 20% of the discount in the fifth year.
The amount you pay back also depends on the value of your home when you sell it.
For example, if you bought your home worth £100,000 and got a 40% discount (£40,000), then sold it after 18 months for £120,000, 40% of £120,000 is £48,000 and as you're in the second year, you would repay 80% of £48,000, which is a whopping £38,400.
You may not have to pay back the discount if you transfer ownership of your home to a member of your family. But you'll need to agree this first with your landlord and then get a solicitor to do this for you.
Right to Acquire
If you can't wait for the extension of Right to Buy and want to execute your right to acquire, you can do so if you've had a public sector landlord for three years and have lived in a housing association property built after 1997, or transferred to the housing association after 1997.
In England, the maximum discount available on these properties is £16,000, the amount of discount you get depends on where you live in the UK. You apply using the Right to Acquire application form. If you then go on to sell the property within the first five years of ownership, you may need to pay some or all of the discount back and must first offer it to either your landlord or another social landlord in the area within the first 10 years.
Right to Buy FAQs
If you're unsure whether you live in a council or housing association property, then get in touch with your landlord who'll be able to let you know.
According to the Government, there are around 2.5 million housing association tenants in England, and of those around 1.3 million have lived in their properties for three or more years and would be given the opportunity to buy.
However, around 500,000 housing association tenants are already eligible for some discounts through Right to Acquire, so in reality the new scheme will extend rights to a further 800,000 tenants, and increase the discounts available.
According to the National Housing Federation, around 15% to 35% of housing tenants eligible for the new scheme will be able to afford a mortgage after the discount has been applied.
People in areas with high house prices, such as London, may struggle to afford to pay for a mortgage even with the discount.
For example, a council home in London could be worth £500,000 on an open market valuation. A 50% discount would be £250,000, but with the cap set at £103,900 in London, you'd still need a mortgage of £396,100. This would cost about £2,100 a month to service before adding council tax and insurances.
You can appeal to a tribunal if you’re stopped from buying your home. This might happen because the 1985 Housing Act exempts some properties from Right to Buy, including ones which are particularly suitable for elderly people, for example if they have ramps, widened doors, lowered kitchen worktops etc.
If the right to buy is denied on the basis that your property meets the criteria set out for elderly people's dwellings, you have the right to appeal the landlord’s decision within 56 days.
If you can't afford to buy the whole property, then shared ownership or Social HomeBuy could be options for you. There are terms and conditions to both; to see if you could get on the property ladder with this route instead, see the Help to Buy & other schemes guide.
Under the Government's new Housing Bill, local authorities will be required to sell off their most valuable council houses, whenever they become vacant.
The Government says 15,000 high-value council homes fall vacant annually, the sale of which it estimates will raise £4.5bn. The councils will then have to build replacement homes with the money raised, and any surplus will be used to fund Right to Buy. The Government says it will make up any difference.
We will have to wait and see, however, whether this actually works.
The Government proposal is for every property sold, they'll build a new one on a one-for-one basis.
However, the National Housing Federation, which represents housing associations, says since 2012 only 46% of properties sold under recent Right to Buy legislation have been replaced – so only time will tell if this actually gets put into practice.
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