You have the right to buy your council home.

The Right To Buy Scheme is considered by many to be one of the greatest opportunities open to council tenants to get on the property ladder.

So far, nearly 1.6 million individuals have exercised their right to buy and this figure suggests that the right to buy scheme is gaining momentum across the UK.

Can Anyone Get A Right to Buy Mortgage

From May 2015, the eligibility criteria has also changed reducing the requirement of 5 years public sector tenancy to 3, making thousands more tenants eligible for Right to Buy. Once the tenant has met the minimum length of time, they are able to purchase the property at a price that is lower than market value through the right to buy scheme and using a mortgage if it is required.

Almost any council tenant is entitled to exercise their right to buy, provided that they are in a suitably secure financial position in order to be able to obtain a mortgage. There are some potential exceptions which include those who have been housed in their property as a condition of their employment, or those allocated housing that has been provided especially for disabled or elderly residents.

You don’t have to do it alone – you may be able to make a joint application for Right to Buy. If you’re eligible, you might be able to buy your home with:

There is nothing in law that specifies how a Right to Buy purchase should be financed. A family member (or someone else) could provide the funding for the purchase. However, legal ownership of the property can only be in the names of the eligible tenant/s and other eligible applicants.

Further Benefits of Right to Buy for the Community

One of the sociological benefits of the right to buy mortgages scheme is that it helps council tenants onto the property ladder, helps tenants to improve their property for their own needs, have no restriction on how big or how many spare rooms you have and to stay in the area that they have lived in for some time. This right to buy scheme has resulted in much more stable and varied communities, which has a positive knock-on effect on all properties in the locality.

In many areas, the money raised through extra sales since April 2012 goes towards building new affordable homes for rent.

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Costs to Consider

Not only does a council tenant looking to use their right to buy have to secure the initial finance to fund the purchase but the ongoing costs will also have to be considered and budgeted for. For many tenants, this will be the first time that the costs of ownership have become relevant and failure to take account of these costs could put the financial viability of the project in jeopardy.

Remember, if payments on right to buy mortgages are not met, you run the risk of losing your home, placing you in a worse position than if you had not exercised the right to buy, in the first instance. With this in mind, ensuring that ALL regular outgoings can be covered should be one of the most important checks to be completed, before exercising the right.

Most council tenants will pay a rent that is inclusive of both council tax and water. Once the property has been purchased, these bills must be paid separately. Whilst technically, these bills are not new, when comparing the monthly cost of renting with the monthly cost of ownership, the rent should be reduced by the cost of these bills to give an accurate comparison.

Insurances will be an added cost that needs to be taken into consideration. All house owners need buildings' insurance which covers potential damage to the physical structure of the property. However, if the Council still own the Freehold, they will be responsible for buildings insurance. Contents insurance is highly advisable, although this is something that a tenant is likely to have in place already and is not, therefore, an additional cost.

Once a mortgage has been agreed, it is important to realise that you will be liable for the payments, even if you become ill and unable to work. Therefore, there should be insurance cover in place to deal with any unexpected event such as death or redundancy.

In the case of a flat, you will have to pay an annual service charge which is a contribution towards the maintenance of the communal areas. If you own a house, you will be responsible for your own maintenance charges, as and when they arise and this can be both unpredictable and extensive. As a home owner, a contingency fund is important to deal with such eventualities.

Protection Cover

Life cover should be considered, so in the event of the demise of the person buying the property, the mortgage can be repaid without having to sell the property.

Income Protection should also be considered, so if the person buying the property is off work due to illness or injury, a monthly amount can be paid directly into their bank account to cover the mortgage, bills and other living costs.

What Effect will the Purchase of a Property have on my Benefits

For many tenants, housing benefit will be available to help with the rent but this will no longer be available to help with the mortgage payments. As an alternative, it may be possible to claim income support - more information should be obtained from the Benefits Agency.

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Getting Started with the Right to Buy

The very first thing that a tenant who wishes to apply for their right to buy should do is to ask their current landlord for a RTB1 form. This must be supplied by the landlord free of charge and if your landlord is not able to produce the form, it can be obtained from the Office of the Deputy Prime Minister. Pay careful attention to the detailed information required on this form, as it is the contents of this RTBI form that allows the landlord to calculate whether you are eligible for the right to buy scheme and, if so, what level of discount you will be entitled to as a percentage of the value of the property.

Landlords Response

The landlord will have to send you a RTB2 response form telling you whether you have the right to buy and to what percentage discount you are entitled. If you disagree with the response, you can appeal. Within twelve weeks of you submitting your RTB1 form, your landlord will give you a Section 125 Notice. As part of this notice, you will be told:

Valuation

If you do not agree with the valuations made by the landlord as part of the Section 125 Notice, you are able to apply to the district valuer, within 3 months of the notice being served. Remember, the district valuer's decision will be final and you will be bound by this, even if it is higher than the valuation on the Section 125 Notice.

The Next Steps

Having received your Section 125 Offer Notice, you will then have 12 weeks in which to inform your landlord of what you intend to do. Failure to notify your landlord of your desire to continue with the purchase may mean that you lose your right and have to begin the process again.

When you accept the Section 125 Offer Notice, you are NOT legally obliged to purchase the property, so even if you do not have a mortgage in place at this stage, it is worth returning the acceptance anyway, as Councils usually take a while to process the applications. Whilst they are preparing their legal documentation, you can sort out your mortgage through a specialist broker, who will guide you through the process thereon.

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Future Implications

Once the right to buy has been exercised, there are still issues that need to be considered, on an ongoing basis. As well as the additional costs of owning a property such as council tax, water, repairs and maintenance, there are additional issues of which right to buy candidates should be aware, such as the repayment of the discount, if the property is resold within a set period of time.

How Long after Purchase does the Repayment Period Last

Anyone who exercised their right to buy before 18 January 2005, has a discount repayment period that lasts 3 years. If the right to buy has been exercised on or after 18 January 2005, then the discount repayment period lasts for 5 years.

Right to Buy Repayments

For those who purchased their property before 18 January 2005, the period in which a repayment of discount would be initiated if the property were to be sold is 3 years. During this time, the amount of the discount that has to be repaid will be reduced, as time goes on. If the property is sold within the first year of the right to buy being exercised, then the entire amount of the discount will have to be repaid. If it is sold in the second year, then two thirds of the discount amount is repayable. If it is sold in the third year, then a third of the discount payment will have to be repaid.

For anyone who has exercised their right to buy, on or after 18 January 2005, if the property is sold within 5 years, at least some of the discount will have to be repaid. If the property is sold in the first year, then the entire amount of the discount is repayable, in the second year four fifths will be repayable, in the third year three fifths will be repayable, in the fourth year two fifths will be due and in the fifth year one fifth of the discount will have to be paid back, if the property is sold.

There is an added catch, in that the discount percentage will apply to the resale value and not the amount at which the property was originally valued. For example, if the property was purchased for £200,000 with a 20 percent discount and the property was sold in the first year for £300,000 then the total discount percentage of 20 percent is due, which in this case would be £60,000 (20 percent of £300,000).

Your home may be repossessed if you do not keep up repayments on your mortgage

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