What you need to know about right to buy mortgages
Buy your council house with a Right to Buy Mortgage
A right to buy mortgage is specifically designed for people who are in a position to buy their council house so that they no longer rent it and instead have the opportunity to own their own home when they wouldn’t otherwise have the chance to. The criteria to be eligible to buy your council house are strict, but if you apply you will qualify for a discount on the value of your property when you do come to buy it.
What are the qualification criteria
The main criteria are that you are a current secure tenant of your local council and that you have also spent at least five years as a public sector tenant, which means that you cannot have rented in the private sector during that time. If you have been transitioned from your local council to a housing association as a secure tenant during the last five years you will also qualify for a right to buy mortgage. It is worth noting that, subject to approval in parliament, the qualifying time will reduce from five to three years.
Discounts on your property when you buy
If you decide to buy your council home after five years you can qualify for a 35% discount on the value of the property when you buy it. This discount increases each year up to a maximum of 60%, or £75,000. If you live in a flat you can potentially qualify for even great discounts.
Although you can then approach any lender for a mortgage you may find that you have to be selective in order to get the best deal. This is because some lenders do not take the discount into account when assessing your deposit and therefore will not be likely to provide you with a mortgage. Other lenders, who offer right to buy mortgages will take the discount into account and will treat this as your deposit as when combined with the mortgage value it equals the total value of the property. Lenders are able to do this as effectively you gain the equity in the house equal to the size of the discount you receive and so lenders use this to reduce the risk of the loan. Other than that, lenders require all of the usual documentation and checks to ensure that you will be able to afford the repayments on the mortgage.
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