Right to Buy Mortgages

There are different discount levels for houses and flats.

For houses you get a 35 per cent discount if you’ve been a public sector tenant for five years. This discount increases by 1 per cent for every extra year you’ve been a public sector tenant. No matter how long you’ve been a tenant, the most you can get off your home’s price is 60 per cent.
For flats you get a 50 per cent discount if you’ve been a public sector tenant for five years. This discount increases by 2 per cent for every extra year you’ve been a public sector tenant. No matter how long you’ve been a tenant, the most you can get off your flat’s price is 70 per cent.
For example, if you wanted to buy a flat worth £200,000 and had been a public sector tenant for ten years, you would qualify for a 60 per cent discount (£120,000). However, the maximum discount is £75,000. This means that if the flat was worth £200,000, you could buy it for £125,000.

Your discount may be reduced by the ‘cost floor’ rule. This rule protects your landlord from losing the money they have spent on repairs and looking after your home in the last 15 years. If they have spent more money than your home is worth, any discount will be reduced. You may not get a discount at all.

Mortgages available for this type of purchase are known as Right to Buy Mortgages. Typically very few lenders offered such mortgages but it has become much more common although it is still classed as a specialist product. These days it is possible to obtain a mortgage to cover up to 100% of the purchase price and also and also to borrow extra for home improvements, with the consent of the Local Authority who will still have an interest in the property for five years.

If you sell your Right to Buy home within five years of owning it, you’ll have to pay back any discount that you got. You’ll have to pay back:

• all of the discount in the first year
• 80 per cent of the discount in the second year
• 60 per cent of the discount in the third year
• 40 per cent of the discount in the fourth year
• 20 per cent of the discount in the fifth year

How much money you have to pay back depends on the value of your home when you sell it.

For example, your home may have been worth £100,000 and you got a 40 per cent discount (£40,000) when you bought it. If you then sold your home in the first year for £110,000, you would have to pay back 40 per cent of £110,000 (£44,000).

You may not have to pay back the discount if you transfer ownership of your home to a member of your family. You will need to agree this first with your landlord and then get a solicitor to do this for you.

If you can’t afford to pay back the discount, eg because the bank is selling your home, you should talk to your landlord. They may not ask you to pay back all of what you owe.

The very good news for clients looking to take advantage of the Right To Buy plan is that three years after discharge we can offer you a mortgage on high street terms with the fees and interest rates being exactly the same for all clients with a good or poor credit history  provided you meet the lenders criteria.

The even better news is that subject to affordability you can borrow up to 100% of the discounted price provided that this does not exceed 80% of the market value of the property. This provides an excellent opportunity for clients who have been made bankrupt in the past to get their foot back on the housing ladder and take advantage of buying property that is heavily discounted.

If you feel that you may qualify for this product please email us a copy of your credit file which you can obtain from either

www.equifax.co.uk or www.experian.co.uk for a one off payment of £2 by your debit card, or you can op for a one month free trial. Once we have viewed your file we will call you to discuss your options.

EMAIL sales@nichefs.co.uk

Office 0800 802 1003