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Do I have the right to buy?

Have you been living in a council or housing association for 3 years? Then the right to buy scheme may be the answer to you owning the property that you are living in. Given that this scheme involves a brilliant discount, it would be wise to contact Clements Financial! Read on to find out if this is relevant for you.

 What is the right to buy scheme?

You may have heard about the ‘Right to Buy Scheme’(RTB), a scheme which allows tenants living in council or housing association to buy the house that they currently live in at a heavily reduced price (depending on how long you have lived there).

Can I use the right to buy scheme?

If your current home is rented to you, by either the council or the housing association in theory. Yes-  you should be able to use the scheme. However there are a few rules:

  • Firstly the RTB scheme is only available in England. If you live in either Scotland or Wales you wouldn’t be eligible. 
  • In addition to this you can only purchase the property you currently live in and have been a public sector landlord for at least three years (it doesn’t need to be three consecutive years, it can be three years collectively). 
  • The property itself needs to be self-contained and not shared with people outside of your household. 

How do I use the right to buy scheme?

First, an adviser will look at your affordability to see if it’s possible for you to apply for a mortgage. Then, we can find out if your housing association property will allow you to purchase the property. There is an online application form that you fill in and sign, then send back to the landlord. A response will normally take up to four weeks if they have been your landlord for less than three years (this process can take up to eight weeks). If the property is freehold the landlord will give you an offer within eight weeks, if the property is a leasehold property this can take up to twelve weeks.

 Within this offer you will find:

  •  Information on the discount you will receive and how this has been calculated.
  • The amount you can purchase the property for and how this is calculated. 
  • The description of the property and service charge estimates for the next five years.
  • Any known structure defects.

On receiving the offer you will have twelve weeks to decide if you would like to accept it and purchase the property. If you don’t answer within the twelve weeks, you will receive a reminder stating that you have 28 days to reply or the application will be closed.

Apply using this form:

https://www.ownyourhome.gov.uk/scheme/right-to-buy/applying/rtb1-application-form/

Do I need a deposit for the right to buy scheme?

Fortunately, the good news is that you don’t necessarily have have to save up for a deposit. In fact, the lender could lend you up to 100% of the purchase price! I’ll give you a scenario, I want to purchase my £220,000 housing association house and I have lived there for eight years. Then my discount would be £83,600. This means that  I could purchase the property for £136,400 and apply for a 100% mortgage of the £136,400. Indeed there are other lenders that would require a deposit. Attis point we would discuss your situation and offer you the mortgage that best fits your needs.

How is affordability calculated?

Your affordability (what you can afford considering income and outgoings), can vary between lenders. Therefore if you receive benefits, child benefit, working tax credits, child tax credits and many more, there’s a good chance this can be used towards your affordability when obtaining a mortgage. Generally lenders would also look at any employed and self employed income that you have to determine how much they are prepared to lend you.

How much discount will I get?

Discount is calculated considering multiple areas. If you have lived in the property for between three and five years the discount is 35%. After five years, this discount increases by 1% for every year you have been a housing association tenant. This goes up to a maximum of 70% discount. Outside of London this maximum discount you can have is £84,600. Inside London the maximum discount is £120,800. 

For example, to purchase your £220,000 housing association house. If I have lived there for eight years then my discount would be £83,600. This means I would purchase the property for £136,400.

 To understand how much your discount may be use the right to buy calculator at:

https://www.ownyourhome.gov.uk/scheme/right-to-buy/can-i-afford-it/right-to-buy-calculator/

What if the landlord and I disagree?

If you feel the valuation of the property is too high, you have three months to write to the landlord and request an independent valuation of the property. The independent valuer will visit your home and give you a valuation of how much they believe the property is worth, you will have twelve weeks to either accept this valuation or pull out of the sale.

If your landlord fails to respond in the correct time scales, you may be given a further reduction in the purchase price. This must be sent to the landlord, who will either move the process along within a month or issue a counter notice explaining why there is a delay.

Initial notice of delay form (RTB6) available from:

https://www.gov.uk/government/publications/initial-notice-of-delay  

If you still don’t receive a reply from the landlord after one month from sending the RTB6 form. You should fill out an Operative notice of delay form (RTB8) available from:

https://www.gov.uk/government/publications/operative-notice-of-delay#:~:text=If%20your%20landlord%20doesn’t,taken%20off%20the%20sale%20price

Any rent you pay while waiting for a response could be taken off the final sale price. Clements Financial could help you fill out any forms required during this process if needed. 

What if I sell my property?

If you decide to sell your property within the first five years of ownership, you will have to pay back all or some of the discount you received. After five years of ownership, there is no discount to pay back. If you were to sell within the first year, you would have to repay all of the discount you have received after this the amount you pay back will reduce on a yearly basis. 

  • 100% in the first year
  • 80 % in the second year
  • 60 % in the third year
  • 40 % in the fourth year
  • 20 % in the fifth year

The percentage you pay back is against the value of the property, so if your property has increased in value since you purchased It the amount you pay back would also be increased.

Can I rent my property out?

Unfortunately not, you would have to reside in the property for a number of years before you could look at renting it out to others. The scheme has been designed for people to get on the property ladder so they have somewhere for themselves to live. 

What are the full costs?

It’s always important to understand the full costs when purchasing any property. Download our FREE ultimate buying guide, the ‘Homebuyer Handbook’, from our website and one of our advisers will explain all costs in detail.

Download from:

https://clementsfinancial.co.uk/free-home-buyers-guide/

I’m ready to apply.

Contact us at Clements financial where we will book you an initial appointment.

If you have been living in council or housing association for at least 3 years, Clements Financial could get you a mortgage with the right to buy scheme - terms and conditions of scheme apply.