What are 'Right to Buy/Council Purchase' Mortgages?

Introduction

At the moment, government rules allow council tenants to buy their homes at a very generous discount. This situation may not last forever.

Mortgages available for this type of purchase are known as Right to buy mortgages. Initially very few lenders offered such mortgages but it has become much more common although still a specialist product. These days it is possible not just to obtain a mortgage to cover the purchase price but also home improvements. So, for instance, you might receive a 50% discount when buying your home (meaning it is worth twice as much as you pay for it) but actually be able to borrow 70% of the open market value to renovate your property.

There can still be problems when buying your council home depending on it's construction and your circumstances and it is best to seek our confidential and non-judgemental advice to find out what is available to you.

Right to Buy Mortgages, what they are, how and where to get one

The 1981 Housing Act allows council tenants to buy the property they live in from the local authority.

Most Council Tenants have "the Right To Buy" their home. The right to buy means you can buy your home from a local authority, a non-charitable housing association or a housing action trust. Usually a "right to buy" mortgage will cost less than on the open market because as a tenant you can obtain a discount on the loan.

Under the right-to-buy scheme, council tenants are entitled to a 32% discount on the value of their house after they have lived in it for two years, followed by a further 1% deduction for each additional year, up to a maximum of 60%. For flats the available discount rises to 70%.

To qualify for a Right to buy Mortgage Loan you must:

1. be the legal tenant of the property you wish to purchase.
2. have been a tenant of this Council or another "right to buy" landlord for at least two years. You may be entitled to a discount off the purchase price of your home. The amount of discount depends on how long you have been tenant in the Council House or other "right to buy" landlord, and the type of dwelling you are living in.

For 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%.

Various mortgage schemes are available which allow capital raising for home improvements.
Monthly mortgage payments are often lower than rental costs.

You can now apply for a Council Right-to-by Mortgage even if you have a history of bad credit such as arrears, defaults or county court judgements (ccj's).

We will arrange loans and mortgages for you even if you're self-employed (with or without accounts), on income benefit, or retired.

People with a clean credit history can also apply.

For more information contact one of Money Advice Direct's trained mortgage specialists on: 0800 074 6918 or email: mortages@insolvencyhelpline.co.uk