Right to buy discount (A guide)
By
HuutiMoney
In this brief guide, we are going to discuss the right to buy discount, the different tiers of the right to buy discount and its terms.
What is Right to buy?
The right to buy scheme is a government scheme which allows council tenants to buy their council homes at a discount. You can buy your right to buy home at a discount if any of the below applies:
it’s your only or main home
It’s a self-contained 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
The Right to buy discount – England
In England, you can get a Right to buy discount if you are a council tenant who whiches to buy their council house and you are eligible for the right to buy scheme. The right to buy discount is on the value of your home at the time of purchase. The maximum right to buy discount in England is £110,500 but only for London boroughs. In all other boroughs, the maximising right to buy discount is £82,000. The Right to buy discount increase each year in line with CPI.
The amount of right to buy discount you will get is based on a few things, they include:
The value of your home
If you are buying a flat or a house
How long you have been a tenant with a public sector landlord. If you are co-buying you will also need to count how long your co-buyer has been a tenant of a public sector landlord and use whoever has the longest term.
You can claim the right to buy discount more than once but you will get a smaller right to buy discount on your second use.
If you sell your home within five years then you will have to repay some of the right to buy discount.
The right to buy discount you get differs for flays and houses
For flats
If you are buying a flat you will get a right to buy discount of up to 50% if you have been a public sector tenant for between three and five years. Once you have passed the five-year mark the discount you are able to get will go up by 2% for every year over the five-year mark for which you have been a public sector tenant but this will go up to a maximum of £110,500 in London boroughs ad a maximum of £82,800 everywhere else in England.
For Houses
If you are buying a house you will get a right to buy discount of up to 35% if you have been a public sector tenant for between three and five years. Once you have passed the five-year mark the discount you are able to get will go up by 1% for every year over the five year mark for which you have been a public sector tenant but this will go up to a maximum of £110,500 in London boroughs ad a maximum of £82,800 everywhere else in England.
If your landlord has spent money on your home
The right to buy discount you may be able to get will also be based on how much your landlord has spent in maintaining or building your home. If your landlord has spent any money then your right to buy discount will be less but it must have been either:
“within the last 10 years – if your landlord built or acquired your home before 2 April 2012
within the last 15 years – if you’re buying your home through Preserved Right to Buy, or if your landlord acquired your home after 2 April 2012” -GOV
If your landlord has spent more money on your home than your home is currently worth, you won’t get any right to buy discount.
Repaying the right to buy discount
As mentioned above if you sell your right to buy home within5 years you may have to pay back some of the discounts you received.
The amount of discount you will have to pay back will be:
100% if you sell in the first year
80% if you sell in the second year
60% if you sell in the third year
40% if you sell in the fourth year
20% if you sell in the fifth year
The amount of discount you may have to pay back will depend on the value of your home at the time of sale.
Example
You bought your home worth £150,000 and got a 40% discount (£60,000). You then sold your home after 19 months for £180,000.
40% of £180,000 is £72,000. As you’re in the second year, you would repay 80% of £72,000 (£57,600).
You may not have to pay back the discount if you transfer ownership of your home to a member of your family. You’ll need to agree with your landlord on this first.
Right to buy Discount- Wales
The right to buy scheme is no longer operational in Wales and ended on the 26 of January 2019.
Right to buy Discount- Norther Ireland
If you are a Northern Ireland resident then you can get the right to buy discount of If you have been are a Housing Executive or housing association tenant for at least five years. The maximum right to buy discount in Northern Ireland is £24,0000.
The discount you will get depends on how long you’ve lived at the property.
FAQs: Right to Buy discount
How long does the right to buy process take?
The right to buy process could take as much as 9 months to complete. You will have 12 weeks to decide if to buy the property and another 3 months to complete the sale.
Does Right to Buy affect benefits?
Right to buy does not affect your benefits as you can still buy a right to buy home if you are in benefits. You may not be able to claim housing benefit or universal credit once you become a homeowner though.
Right to buy discount calculator
If you are still curious about how much right to buy discount you could be eligible for then you could use a right to buy discount calculator to work this out.
Alternatives to the right to buy scheme:
There are other government schemes which you may be eligible for aside from the right to buy scheme, they 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.
- Preserved right to buy- same as above.
- Right to acquire- same as above.
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.
Get a mortgage for your right to buy home
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 discussed the right to buy discount. If you have any questions or comments please let us know.
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.