How Just Mortgage Brokers Can Help You
The government’s Right to Buy scheme can represent a welcome boost for council tenants who want to get a foot on the property ladder. Under the scheme, anyone who has been a tenant for three or more years is potentially eligible, and those who are accepted can obtain a discount on the purchase price.
The Key Differences
The amount of discount awarded is dependent upon two things: how long you have been a tenant, and whether the property is a house or a flat. Different discount caps also apply to properties in London.
The initial discount offered to tenants with a minimum 3 year tenancy is 30% for a house and 50% for a flat. Additional discounts are offered for those whose tenancies have lasted 5 years or more – 1% per year for a house and 2% for a flat – up to a maximum total discount of 70%, or £77,900 (£103,900 in London) for both houses and flats.
|Type of property||House||Flat|
|Discount due after 3 years’ tenancy (qualifying level)||30%||50%|
|Additional discount per year if you have over 5 years’ tenancy||1%||2%|
|Discount capped at||70% or £77,900 (London £103,900)||70% or £77,900 (London £103,900)|
Assuming you have been a council tenant for 10 years and are buying a property worth £100,000, this would mean:
|Type of property||House||Flat|
|Initial discount due||£30,000||£50,000|
|Total value of discount applied||£35,000||£60,000|
|Final purchase price of property||£65,000||£40,000|
As far as securing a mortgage is concerned, a tenant purchasing a property under the Right to Buy scheme is in the same position as anyone else buying a property – they require a deposit (although some lenders will generally accept the Right to Buy discount in lieu), and they need to be able to prove they can keep up the repayments. However, if the property to be purchased is a flat in a high-rise building, there may be some additional requirements to take into consideration.
Some lenders can be reluctant to grant mortgages for the purchase of high-rise flats, for a number of reasons: older council blocks can be hard to maintain; they may have concerns about the resale potential of such properties; the communal areas may be dilapidated, which both pulls down the value and reduces their desirability; and they may be concerned about the mix of owner/occupiers and tenants.
Due to these factors and a drop in the value of such properties following the credit crunch, certain lenders will not consider mortgages for flats in a building higher than 7–10 storeys. In some cases, where mortgages are granted on flats in buildings with more than, for example, 10 storeys, they may only consider lending against flats on the bottom 8 floors. You should also be aware that high-rise flats are often classed as a non-standard building, so specialist insurance may be required.
Whether you are in a council house, flat or a high-rise apartment block, you can improve your chances of getting a mortgage by enquiring early in the process and obtaining a mortgage decision in principle. By working with an experienced mortgage broker, you will potentially be able to access lenders beyond the high street, with the added advantage that the broker will be able to advise on which lenders offer mortgages that will match your own circumstances and the property type.