In this brief guide, we will answer the question “ Can I buy my council house while on benefit? “.
Can I buy my council house while on benefit?
Yes, you can buy your council house while on benefit. In fact, there are government schemes which help you buy your council house while on benefits.
There is currently no mortgage lender which we know at this point that will refuse you a mortgage because you are on benefits. In fact, mortgage lenders will add your benefit to their mortgage affordability assessment as part of your supplementary income (as you will likely be expected to have a main income through a job to qualify for a mortgage).
Buying your house while on benefit is possible but you won’t be able to claim housing benefit any more and you won’t be able to use this to pay for the costs of your mortgage. If you are struggling to pay your mortgage then you should consider other government schemes such as the support for mortgage interest which could help you cover the interest element of your monthly mortgage repayments.
Anyone who has more than £16,000 in savings is not eligible for housing benefit so if you have over £16,000 in savings and you are still receiving housing benefit then when you go to buy your council house your council may look into this to discover if you were claiming housing benefits when you shouldn’t have.
If you are on housing benefit to help pay your rent you won’t be able to claim this anymore (if you are an owner-occupier) as mentioned above but you could still claim income support. You will have to wait about 39 weeks for your income support to come through.
This means you can still be on benefits after buying your council house.
Benefits you can buy a house with:
- Attendance Allowance benefit
- Carer’s Allowance benefit
- Child Benefit
- Child Tax Credit benefit
- Disability Living Allowance (DLA)
- Incapacity Benefit (IB)
- Industrial Injuries Benefit (IIB)
- Maternity Allowance benefit
- Pension Credit benefit
- Severe Disablement Allowance
- Widow’s Pension benefit
- Working tax credit benefit
This is not an extensive list so please check with your mortgage broker.
If you are wondering if you can get a mortgage whilst only on benefits with no main income then we very much doubt this is possible as most mortgage lenders will require you to have a regular income from a job however there are mortgage lenders that will lend to you and you may be able to get some financial help from the government as we have defined below.
Getting a mortgage with only benefits
If benefits your only or main source of income then you may still be able to get a mortgage and get housing cost payments to help you cover the interest cost on your mortgage. You will only be able to get housing cost payments if you are eligible for universal credit.
You may still be eligible for housing cost payments if you are already receiving benefits when you get your mortgage.
Housing cost payments can be used for:
The interest element on your mortgage or house loan.
Service charges on your property if it is a leasehold.
Interest on any home improvement loans which you use to improve, carry out repairs or change your home so it is more suitable for you to live in.
As mentioned below housing cost payments can only be used to pay the interest element of your mortgage and not the capital. You’ll still need to come up with a suitable capital repayment method.
The amount of housing cost payments you receive will be set by the department of works and pensions. This means they may decide you don’t need as much as you have applied for because the home you have chosen is too big or overpriced or maybe in an area which isn’t “affordable”. It will be left to you to explain your need for a house in a particular area or the size of your house. Maybe it is close to work, close to your family, close to where you receive medical help or maybe you need a much bigger home because you have a live-in carer. You should ensure ou explain this in your initial housing cost payments application if not you will be left with whatever theDWP thinks is a fair amount for you.
You can only use housing cost payments on mortgages or housing loans of ut £200,000 plus any repair or adaptation costs.
If you were previously on housing benefits then you will likely be given the same amount for your housing cost payments as you received on housing benefits, The only time when this will not be the case is if you are buying a house which is more suited to a disabled person than the one you previously lived in.
How to apply for housing cost payments?
To apply for housing cost payments you will need:
Proof of your income
Details of your mortgage
Details of your mortgage
Any relevant financial information
To get the application form you should contact the benefits enquiry team on 0800 882 200 or textphone 0800 24 33 55 for general advice or to ask for leaflets and claim forms.
The housing cost payment is made to your mortgage lender and is backdated to when you first applied. Be sure to inform your mortgage lender that you are now receiving housing cost payments.
This is to avoid you paying too much on your mortgage and potentially incurring early repayment charges for overpaying on your mortgage.
What government schemes can I buy my council house with while on benefit?
You can use any of the Government schemes below to buy your council house while on benefit but there are two main schemes which target those who live in council houses and are recipients of benefits, these are the right to buy scheme and the preserved right to buy. We will talk about these two schemes in detail below.
If you are an eligible first-time buyers or home mover then you may be able to get a mortgage with a government scheme. You can use the scheme as a single person or with multiple people but the scheme rules will still apply.
If you are a first-time buyer then you will likely need to sign a first-time buyer declaration
Some of the Government schemes you may be able to use with a single include:
- Lifetime ISA– gives you a government bonus of £1,000 if you save the maximum £4,000 a year.
- Help to buy ISA– gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000. Before you get either you should consider which is better. Lifetime ISA vs Help to buy ISA.
- Help to buy equity loan- gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.
- Shared ownership- You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage.
- Armed forces help to buy- similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
- Rent to buy- This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
- Right to buy- allows you to buy your home at a discount price.
- Preserved right to buy- same as above.
- Right to acquire- same as above but for housing associations.
Depending on where you live, you may also be able to take advantage of home buying schemes provided by your local council. Example: In Norwich, the local councils provide the Norwich home options scheme.
Right to buy scheme
The right to buy scheme is a government scheme which helps council tenants buy their homes with a discount. It has been piloted and is due to be extended to housing association tenants. The discount you will receive is based on the region your home is located in.
From 6 April 2019, maximum discounts are £82,800 across England and £110,500 in London. Discounts increase in April every year in line with any increase in inflation.
The exact amount you will get for your housing cost payments will depend on how long you were a council tenant and the value of the property you want to buy in the open market.
The right to buy discount for council flats starts at 50% for those who have been council tenants for 3- 5 years and increases by 2% for each additional year of council tenancy up to a maximum of 70%.
The right to buy discount for council houses starts at 35% if you have been there between 3 and 5 years and increasing by 1% for every year you have been a council tenant up to a maximum of 70%.
You can buy your home with right to buy if:
it’s your only or main home
you’re a secure tenant
you’ve had a public sector landlord (for example, a council, housing association or NHS trust) for 3 years – it does not have to be 3 years in a row
Since 2012 when new reforms were introduced the right to buy fraud has increased by over 400%.
What is the right to buy fraud?
The right to buy fraud is essentially where people who are eligible for benefits and living in council houses are being gifted money from property developers to buy their council homes at a discount and then go on torent these properties at market rate.
It was reported in 2015 that 22% of right to buy sales in the Weestminster council were to people receiving housing benefits. The obvious question was how these people could buy properties in one of the most expensive areas in London whilst receiving housing benefits just prior
You can use a right to buy calculator to see what your potential discount could be.
Preserved right to buy
If your home used to be owned by the council, but they sold it to another landlord (like a housing association) while you were living in it, you may have ‘Preserved Right to Buy’.
You should ask your landlord if you have preserved right to buy.
Using a mortgage broker to buy your council house
You may want to consider using an independent mortgage broker to get a mortgage.
Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases. This could be over 11,000 mortgage products. This may have some advantages than going directly to a mortgage lender.
A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you.
After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle. This will allow you to shop for your home easier as more estate agents and sellers may take you seriously or it will give you confidence that your remortgage is indeed a possibility before you make a full mortgage application. Once you have found a home you want to buy or are satisfied with the mortgage offer for your remortgage then the mortgage broker will then look to get you a mortgage offer.
This will come with a key facts illustration document which details out the features of your mortgage including how much you will pay per month if there are any limits such as early repayment fees, or annual overpayment limits.
If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer. Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it, they will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer and set a completion date with the seller or their conveyancer.
In this brief guide, we answered the question “ Can I buy my council house while on benefit? “. If you have any questions or comments please let us know below.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.