Right to Buy mortgage scheme explained: how to buy your council home

Looking to buy your council home? Or maybe you’re a landlord and a tenant is trying to purchase your property through the scheme?

Introduced over 40 years ago in England, it offers council tenants and some housing association residents a chance to purchase their homes at a discount.

The discount tenants will get depends on how long they’ve lived in the property, the property type and its value. It’s a great way for tenants of these properties to step onto the property ladder if they’re eligible.

Keep in mind, though, that this scheme isn’t available in Scotland or Wales as it was abolished to protect social housing numbers.

Although Right to Buy is widely available, certain criteria must be met to be eligible. For those in England, you can apply to buy your council home from your landlord if:

• The property is the tenant’s main or only home
• The property is self-contained (no shared rooms with anyone outside your household such as a shared kitchen, lounge, or bathroom
• The tenant is secure with a legal contract
• The tenant has had a public sector landlord for at least 3 years (the years do not have to be consecutive)
• You have no legal issues with debt

Also, if the tenant wants to purchase with someone you can apply jointly with:

• Anyone sharing the tenancy
• Up to three family members who’ve lived with the tenant for the past year (even if they’re not on the tenancy)

Remember, every situation is unique. If you’re a tenant and are unsure about anything you should contact your landlord, or you can check out more on eligibility here.

The Right to Buy scheme has specific guidelines around property ownership and financing. Here are the key points for both tenants and landlords to consider:

1. Ownership alignment: The legal owners of the property must match those named on the Right to Buy application.
2. Financing flexibility: Whilse there’s some flexibility in how the purchase is funded, the scheme aims to benefit the intended recipients – usually long-term council tenants.
3. Third-party contributions: Family members, partners, or friends can contribute financially to the purchase. However, this doesn’t grant them automatic ownership rights.
4. Landlord considerations: Council landlords must ensure that the Right to Buy application and subsequent ownership align with the scheme’s regulations to maintain it’s integrity.
5. Tenant responsibilities: Eligible tenants should be aware that while they can receive financial support, they will be the legal homeowners and responsible for the property.

Thinking about buying or selling your council home through Right to Buy? Let’s walk you through the process step by step:

1. Start by filling out the RTB1 application form as a tenant. This is for council or housing association tenants looking to purchase their homes under the Right to Buy scheme. Make sure you’re eligible before applying.

2. Once you’ve completed the form, you’ll need to forward it to your landlord for review.

3. The landlord will need to respond within 4 weeks (or 8 if they have been your landlord for less than 3 years). They’ll either agree to the sale or explain why they’re declining.

4. If the landlord agrees to sell the property to the tenant, they will need to value the property and calculate the discount.

5. The landlord will then need to send the tenant a formal offer. They have 8 weeks to send an offer if the property is a freehold, and 12 weeks if it’s a leasehold. The offer will need to include the following details:

• The property price and how they calculated it
• The discount and how it was calculated
• A description of everything included in the property
• Any known problems impacting the property’s structure
• Any estimates of service charge costs

6. Once the tenant has received the offer, they’ll have 12 weeks to decide on whether to accept the offer or decline it. If they don’t respond within this timeframe, the landlord needs to send a reminder, and the tenant will have just 28 days to respond. After that, the landlord has every right to withdraw their offer.

Remember, a tenant can always change their mind and continue renting at any point in the process. There is no penalty for starting the process and not finishing it.

If you decide to accept the landlord's offer and move forward with buying your council or housing association home, you’ll be responsible for financing the home.

Financing a new home is a big step. You might need a mortgage, just like other homebuyers. This is a big commitment, and beyond monthly mortgage payments, you’ll also be responsible for other costs you may not have been responsible for before. These could include:

• Monthly bills
• Any household repairs
• Maintenance costs
• Any other costs previously included in your rent

If you’re buying a leasehold property, factor in service charges and ground rent too, which you may have to cover the costs for.

If this is the first property you're buying, you can check out our first-time buyers guide for a full breakdown of what to expect.

If you’re eligible for Right to Buy, then that’s great news! From 21st November 2024, maximum cash discounts will be reduced from £16,000 to £38,000 depending on where you live in England.

Applications for the Right to Buy scheme received by social landlords before 21st November 2024, will be eligible for the previous discount rates.

The discount you can get depends on a few different things, including:

• How long you’ve been a public sector tenant
• Whether you’re buying a house or a flat
• The value of the property you’re buying

Buying with someone? If this is the case, you count the years of whoever has been a public sector tenant the longest.

It’s important to mention that if you decide to sell the property within the first 5 years of your Right to Buy purchase, you’ll need to repay some or all the discount you received. More on this later.

Base Discount Calculation

• For houses: You get a 35% discount if you've been a tenant for 3-5 years
• For flats: You get a 50% discount if you've been a tenant for 3-5 years

Additional Years

• For houses: Add 1% for each year beyond 5 years
• For flats: Add 2% for each year beyond 5 years
• Both types: Maximum percentage discount is capped at 70%

Regional Maximum Caps

Your final discount will be whichever is lower: the percentage calculation above OR your region's maximum cash amount:

• London: £16,000 (except Barking, Dagenham and Havering: £38,000)
• South East: £38,000 (some areas capped at £16,000)
• Eastern: £34,000 (Watford capped at £16,000)
• South West: £30,000
• North West: £26,000
• West Midlands: £26,000
• Yorkshire and the Humber: £24,000
• East Midlands: £24,00

Selling a property purchased through Right to Buy comes with certain considerations for both the homeowner and the former landlord. While the discount received might make selling for a quick profit appealing, it’s not quite that straightforward.

For the first 10 years after purchase, homeowners can’t simply sell at full market value and keep all the profit. Instead, they must first offer the property back to their previous landlord or another social housing provider in the area. This requirement helps maintain the availability of social housing stock.

If the landlord agrees to buy the property, they’ll pay the current market value. This price needs to be agreed upon by both parties. In cases where an agreement can’t be reached, a district valuer can step in to set a fair price, ensuring both parties interests are considered.

Planning to sell your Right to Buy home? Let’s talk about what happens to your discount if you sell within the first five years.

If you sell your home within the first year, you’ll need to repay the entire discount. After that the repayment amount decreases each subsequent year:

• 2^nd year: 80% of the discount
• 3^rd year: 60% of the discount
• 4^th year: 40% of the discount
• 5^th year: 20% of the discount

Once you’ve owned the home for five years, you won’t need to repay any of the discount.

It’s important to also know that your discount is tied to your property’s value when you sell. If your home has increased in value, the amount you need to repay will increase too.

The Right to Buy scheme offers some great benefits for eligible council and housing association tenants. Let’s explore why it might be an attractive option for you if you’re eligible:

• Discounted purchase: The standout advantage is the substantial discount on your home’s market value. This could make homeownership much more affordable.
• Stepping onto the property ladder: If you’ve been a long-term tenant, this scheme could be your path to becoming a homeowner.
• Flexible applications: You can make a joint application with family members who’ve lived with you for at least a year. This can make the purchase more manageable.
• Financing flexibility: While you need to be named on the property ownership, there’s leeway on who can help finance the purchase. This could open more options for you.
• Long-term investment: Owning your home can be a valuable investment. You might benefit from any increase in property value over time.

While Right to Buy offers exciting opportunities, it’s important to consider all aspects before making your decision. Let’s look at some key points to keep in mind:

• Increased financial responsibility: As a homeowner, you’ll be taking on costs that were previously covered by your landlord. This includes repairs, maintenance, and improvements to your property.
• Mortgage commitment: You’ll likely need a mortgage to purchase your home. This is a significant long-term financial commitment, so it’s crucial to ensure you’re comfortable with being able to keep up with repayments.
• Sale restrictions in early years: If you decide to sell within the first ten years, you’ll need to offer the property back to your previous landlord or another social housing landlord. Also, selling within the first five years means repaying some or all your discount.
• Changes to benefits: Becoming a homeowner might affect your eligibility for certain benefits or support services that were available to you as a council tenant.

If Right to Buy isn’t an option for you, there is another scheme that might help, called Right to Acquire. This scheme is designed for housing association tenants who want to buy their homes at a discount.

Here’s what you need to know about Right to Acquire:

The discount is capped at £16,000 – a helpful boost towards homeownership.

To be eligible, you’ll need:

• At least three years with a public sector landlord
• The property you intend to purchase is your main home
• No shared rooms with other tenants outside of your household (self-contained)

Your property must also meet one of these criteria:

• Built or bought by a housing association after March 1997
• Transferred from a council to a housing association after March 1997