Helping you secure a right to buy mortgage
If you’ve lived in your council home for a number of years, you may have the right to buy it at a discount. This is called the Right to Buy scheme. Getting a mortgage to fund the purchase is the next step, and it works differently from a standard home loan.
A right to buy mortgage is a loan used to buy your council or housing association home under the Right to Buy scheme. The key difference is that the government discount you receive can often be used in place of a cash deposit. This makes it possible to buy your home without saving a large amount upfront.
This guide explains how the scheme works, what lenders look for, and what options may be open to you, even if your credit history isn’t perfect.
What is a right to buy mortgage and how does it work?
The Right to Buy scheme gives council tenants in England the legal right to purchase their home at a discount. The size of the discount depends on how long you have lived there and whether you live in a house or a flat.
Once you’ve applied and your landlord has confirmed your discount, you can use that discount as your deposit when applying for a mortgage. Most specialist lenders will accept the Right to Buy discount in place of a cash deposit.
Checking your eligibility
To use the Right to Buy scheme, you must meet certain conditions:
- The property must be your only or main home.
- You must be a secure tenant.
- You must have lived in public sector housing for at least three years. The three years don’t need to be in the same property.
- The property must not be due for demolition or subject to a legal order.
Some housing association tenants may also be eligible under a related scheme called Right to Acquire. If you’re unsure, check with your landlord first.
How the discount is calculated
The discount you receive depends on the type of property and how long you’ve been a public sector tenant. The rules changed on 21 November 2024, so the figures below apply to applications made on or after that date.
| Property type | Tenancy of 3 to 5 years | After 5 years | Maximum discount |
|---|---|---|---|
| House | 35% | 35% plus 1% for each extra year | 70% of property value (subject to regional cap) |
| Flat | 50% | 50% plus 2% for each extra year | 70% of property value (subject to regional cap) |
The 70% cap is the upper limit, but regional cash caps also apply. Your discount will be whichever is lower: 70% of the property value or the cash cap for your region. The regional caps from 21 November 2024 are:
| Region | Maximum discount | Exceptions |
|---|---|---|
| North East | £22,000 | None |
| North West | £26,000 | None |
| Yorkshire and the Humber | £24,000 | None |
| East Midlands | £24,000 | None |
| West Midlands | £26,000 | None |
| Eastern | £34,000 | £16,000 in Watford district |
| South East | £38,000 | £16,000 in Reading Borough, West Berkshire, Hart District, Oxford, Vale of White Horse, Tonbridge & Malling, Epsom & Ewell, and Reigate & Banstead |
| South West | £30,000 | None |
| London | £16,000 | £38,000 in Barking & Dagenham and Havering |
Source: MoneyHelper / GOV.UK. Regional caps apply to applications made on or after 21 November 2024. For applications made before that date, the caps were £136,400 in London boroughs and £102,400 elsewhere. Always confirm current figures with GOV.UK or your landlord before you apply.
It’s also worth knowing that if your landlord has spent money building or maintaining your home in the last 30 years, your discount may be reduced. The amount of any reduction depends on when your application was made and how much was spent. Your landlord will confirm this as part of the Right to Buy process.
Can I get a right to buy mortgage with no deposit?
Yes, in many cases. The Right to Buy discount can act as your deposit. This means you may be able to buy your home without any cash savings at all. This is one of the main reasons the scheme is so popular.
Using your discount as your deposit
When you apply for a right to buy mortgage, the lender will look at the discounted price of the property rather than the full market value. The difference between the two is treated as your deposit.
For example, if your home is worth £200,000 and your discount is £70,000, you would be borrowing £130,000 against a property worth £200,000. This gives a loan to value (LTV) of 65%, which is well within the range most lenders are comfortable with.
What if the discount is not enough?
In some cases, the discount alone may not bring the LTV low enough for a lender to approve the mortgage. This can happen if your home is valued highly relative to the discount cap. In these situations, you may need to put in some extra cash or look at specialist lenders who are willing to lend at a higher LTV.
In these cases, speaking to a specialist broker who can look at your full picture is the best next step.
Applying for a right to buy mortgage with bad credit
Having a less than perfect credit record doesn’t mean you can’t get a right to buy mortgage. Many people who apply have had financial difficulties in the past. Specialist lenders are set up to look beyond a simple credit score and consider the full picture.
If you’re worried about your credit history, it is worth reading our guide on getting a mortgage with bad credit before you apply.
Our approach to credit hurdles
Specialist lenders look at each application on its own merits. Rather than simply using a credit score to decide, they look at your full financial history and how your situation has changed over time. If things have improved since a difficult period, a specialist lender will take that into account.
Common credit issues we consider
We are able to consider applications from people who have had:
- Missed or late payments
- Defaults or CCJs
- A debt management plan
- Previous bankruptcy or an IVA, depending on when it was discharged
Each case is different. The more time that has passed since a credit issue, the more likely we are to be able to help. Speak to a broker to find out where you stand.
Important things to consider before you buy
Buying your home is a big step. There are a few things worth thinking about before you go ahead.
The five-year repayment rule
If you sell your home within five years of buying it through Right to Buy, you may have to repay some or all of the discount you received. The amount you repay decreases the longer you have owned the home. If you sell after year one, you repay the full discount. By year five, you repay nothing.
There is also a separate rule that gives your local council the right to buy the property back from you if you sell within ten years. They must be offered it at the market price first.
You can find out more about what happens if you are refused the right to buy in our separate guide.
Hidden costs of homeownership
As a tenant, many costs are covered by your landlord. As a homeowner, you’re responsible for all of them. Before you commit, make sure you have budgeted for:
- Buildings and contents insurance
- Repairs and maintenance
- Service charges and ground rent, if you own a flat
- Solicitor and survey fees as part of the buying process
Right to Buy purchases are exempt from stamp duty if the purchase price is below the stamp duty threshold after your discount is applied. But it is worth checking this with your solicitor.
Ready to take the next step towards owning your home?
High street vs specialist lenders
Not all lenders offer right to buy mortgages. Many high street banks and building societies don’t accept the discount as a deposit, or they will not lend to people with previous credit issues. This is where specialist lenders are different.
We’re set up to help people who don’t fit the standard mould. Whether you have a less than perfect credit history or a complex income, we’ll look at your case and try to find a way to help.
To find out what is possible for you, speak to a broker who has experience with right to buy cases. Pepper Money works with a network of specialist brokers who know this area well. Find out more about our right to buy mortgage options or find a broker to get started today.