Right to Buy Discount Reduced: What You Need to Know
The Right To Buy Deadline Is Fast Approaching!
Your home may be repossessed if you do not keep up repayments on your mortgage.
The information contained within was correct at the time of publication but is subject to change.
6th November 2024
A week has passed since the recent budget announcement, and one significant change that appears to have flown under the radar is an adjustment to the Right to Buy (RTB) scheme.
In this blog, we're going to look at everything Right to Buy, what it is, what's changing and how you can apply before it's too late.
What Is The Right To Buy Scheme?
Right to Buy is a scheme introduced in 1980 by Margaret Thatcher that allows social housing tenants to purchase their homes at a discounted price.
Currently, eligible tenants can receive a discount of up to £102,400 across England and £136,400 in London. This discount can be used as a deposit for a mortgage, helping tenants to buy their homes.
Who Can Apply For Right To Buy?
To be eligible for the Right to Buy scheme:
- You need to have been a council or housing association tenant for at least three years, although not always for a continuous three years
- The property is your only or main home
- You don’t live in sheltered accommodation
- You don’t have serious debt problems
- You don’t have outstanding possession orders against you
- Your home isn’t due to be demolished
What Has Changed With The Right To Buy Scheme?
As of the 21st November 2024 the Right to Buy discount will be reduce to levels last seen before 2012. Before 2012, the discount was dependent on your location.
How Do I Apply For The Right To Buy Scheme?
If you are eligible for the Right to Buy scheme, you must apply to your social landlord before the 21st November 2024. This will secure you the current, more generous discount.
To apply for the discount you need to:
- fill in the Right to Buy application form
- send it to your landlord
- wait for your landlord to accept (they have 4 weeks)
- once you have an offer from the landlord, you have 12 weeks to accept the offer
How Much Discount Can I Get Through The Right To Buy Scheme?
If you live in a house, then you can get a 35% discount if you’ve lived in the property for 3 to 5 years. For each year above this you can get a further 1% discount up to the maximum.
For flats, it’s a 50% discount if you’ve lived in the property for 3 to 5 years. For each year above this you can get a further 2% discount up to the maximum.
What Happens When I Want To Sell My Right To Buy Property?
One thing to be mindful of is if you decide to sell the property in the future.
If you decide to sell within 10 years, then you need to offer the property back to your old landlord or another social landlord in the area. If they don’t agree to buy it within 8 weeks, you are free to sell it to anyone.
If you sell the property within 5 years, then you have to repay part of the discount.
In the first year, you have to pay back 100% of the discount.
In the second year, you have to pay back 80% of the discount.
In the third year, you have to pay back 60% of the discount.
In the fourth year, you have to pay back 40% of the discount.
In the fifth year, you have to pay back 20% of the discount.
That percentage is based on how much you sell the property for too.
Example
You bought your home worth £100,000 and got a 40% discount (£40,000). You then sold your home after 18 months for £120,000.
40% of £120,000 is £48,000. As you’re in the second year, you would repay 80% of £48,000 (£38,400).
What Mortgages Are Available Through Right To Buy?
The good news is that Right to Buy mortgages are treated very similarly to normal mortgage applications. Most of the big lenders are able to help, although not every lender. The best thing to do is contact me as soon as possible to put a recommendation together. You are still able to apply for the traditional fixed or variable rates that you would apply for if you weren’t using the Right to Buy scheme.
What Extra Information Will The Lenders Need For A Right To Buy Mortgage?
As part of your mortgage application, you will need to provide the formal Right to Buy offer letter detailing the agreed-upon discount. This document serves as crucial proof of your deposit and will be required by both the lender and your conveyancers. If you're combining the discount with personal savings as a deposit, you'll need to provide evidence of those savings, such as recent bank statement. In addition to these specific requirements, you'll typically need to provide standard proof of income, identification, and address. This will involve submitting recent bank statements and undergoing a credit check to assess your financial history and outstanding debts.
If you have the opportunity to purchase your home through the Right to Buy scheme, please contact me as soon as you can as there isn't much time left before your discount will be reduced.
Just fill in the form below and I'll contact you within a working day to go through your options.