Right to Buy Mortgages. An introduction.But firstly my name is Dan, I am a CeMAP qualified mortgage & protection adviser. This video is purely for educational purposes only, and this is in no way advice & should not be seen as advice or a recommendation to act and I must stress your home may be repossessed if you do not keep up with the repayments on the mortgage.
Grab a drink, sit back, and relax. I will hopefully cover off the basics of the Right to Buy scheme, and I will put a link in the description below to the Government’s website which will cover these points in finer detail.
So what is Right to Buy?This is where the local council give you permission to purchase the local council property that you live in. If you are looking to purchase the council property you live in, you can approach the council and they may sell the property to you. The longer you have been there, the bigger the discount they will give you for purchasing the property. There is criteria that needs to be met, so please visit the Government’s website link in the description.
So what are the positives of Right to Buy?The biggest one, has to be, without a doubt the discount you will get when purchasing the property. As I have already mentioned, the longer you have lived in the property, the bigger the discount you will get and the discount can be used as a deposit when applying for a mortgage. You can also add your own savings towards this to reduce your mortgage borrowing even further. Having the discount is usually better than applying for a mortgage on another property using your own savings for example, such as a 10-15% deposit because interest rates are may be lower and you do may not need to borrow as much.
If you qualify for the maximum discount, you will have quite a healthy deposit and in some cases this can be up to as much as 70% deposit which will end up getting you some of the lowest rates in the market at the time of purchasing the property but there are cash limits to this depending what area of the country you live in. Something to bear in mind, to obtain the maximum discount, you will need to be a council tenant for a number of years, so your mortgage term maybe shorter to ensure it is repaid before you reach retirement age.
So what are the negatives of the Right to Buy?One of the negatives of the Right to Buy is if you sell within the first 5 years of owning the property, you will need to pay back some, or all of the discount, this depends on what year you sell the property. Also if you want to sell within the first 10 years, the council have first refusal, what this means is you have to ask them first if they want to buy the property back from you and if they do so, it will be at the sale price market value, not the price you purchased this the property for. Another negative is that when you come to purchase the property, you can not capital raise for any purpose other than home improvements, and only a few lenders at the time of recording will allow you to do this. So check with a mortgage adviser like myself or with the lender before you apply.
Whilst I am on this subject, you will also be responsible for the upkeep of the property, whereas previously, the local council were responsible, so you need to budget for this.
Something I will also mention is mortgage lenders will want their own independent surveyor to come out. So whilst the council have already done their own survey, the lender will get their own survey as a second opinion of the value.
That is an introduction to the main part of Right to Buy, please get in contact with me if you require any more information, my contact details are in the description, or alternatively put a comment below.
If you are looking to obtain a mortgage, it is important to check your credit profile before applying. If you sign up to CheckMyFile using the link in the description you will be able to check your credit score and history on Equifax, Experian, TransUnion, and Crediva all with the 1 login, this is important because not all lenders use the same credit report, so you need to check you can see everything they’ll be able to see before applying, as different lenders, accept different levels of credit scores and credit history.
It is free for 30 days but if you wish to keep viewing your credit report after the 30 days, so you can keep an eye on your credit score and history, there is a monthly subscription cost of £14.99. To avoid this, you could sign up to each of the credit reference agencies separately and utilise their 30 day free trials. If you did continue to use CheckMyFile after 30 days, I receive a £12 referral fee.
Remember your home may be repossessed if you do not keep up with the repayments on your mortgage.
If you want to watch a video on first-time buyers tips, please watch, this video.
If you want to watch a video on how to get approved for a mortgage, please watch this video.