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Expert advice for those seeking a Right to Acquire mortgage.
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Finding The Best Right To Acquire Mortgage Deal For Your Circumstances
If you’re a housing association tenant in England and looking to make that first step onto the housing ladder, Right to Acquire can be that way forward – but only if you can secure the mortgage finance you need.
If you are wondering about the ins and outs of getting a mortgage to buy your own property from your public sector landlord — especially any difficulties you might face if you have a poor credit score — we’re here to help.
Securing a mortgage on a discounted property when you are a social tenant eligible for the Right to Acquire scheme isn’t always straightforward, but we can help you secure the right mortgage deal for your circumstances. With our help, we can search the market to find deals so you have the best chance of securing the finance to help you switch from tenant to homeowner.
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Maximise your chance of mortgage loan approval with specialist mortgage broker advice from an expert in Right to Acquire Mortgages
Right to Acquire scheme mortgages
Mortgages for a Right To Acquire can sometimes be a little harder to come by as there are less lenders willing to lend to those trying to use the scheme to buy a property, but there are still options available. A mortgage on a Right to Acquire is actually pretty similar to a standard mortgage, the main difference being that the lender will base the mortgage on the discounted price of the property, not the full market value.
The good news for borrowers looking to buy a property under the scheme is that most lenders will often not require a deposit, as they will effectively take into account the discount being received and use this as the deposit. Some may still look for a 5% deposit. Lenders will still carry out the same checks regarding affordability, income and creditworthiness as they would for a standard mortgage.
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What is the Right to Acquire Scheme?
Right to Acquire is a government scheme available to housing association tenants in England which allows them to buy their rented home at sizeable discounts of up to £16,000. It is open to tenants who have had a public sector landlord for a period of at least three years. The property must be their sole residence.
The intention of the scheme is to help tenants become homeowners, often for the first time, and provide a way for them to get on the property ladder and build equity in their home. Right to Acquire is available to those who rent from the following landlords:
- Housing associations
- NHS trusts and foundation trusts
- Councils
- The armed services
Using a mortgage broker for the Right to Acquire scheme
Boost your chances of mortgage approval when applying for the Right to Acquire scheme by using an approved specialist mortgage broker. Their expertise will save you time by finding you the right mortgage products and a mortgage lender who will be more willing to lend to you.
Mortgage brokers will have access to a range of mortgage lenders with products suitable for your circumstances. As the range of lenders willing to lend at the discounted price for those using the Right to Acquire scheme is limited, a mortgage broker will find lenders who are more accommodating to those currently living in a housing association property.
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Right to Acquire Mortgage FAQs
How to apply for the Right to Acquire scheme?
Making an application for Right to Acquire is easy enough and just requires the completion of the application form which needs to be sent to the landlord. The landlord must give a response within 4 weeks of receiving the application, and provide reasons if their response is negative.
A purchase price and level of discount will need to be agreed after which the buyer has up to 12 weeks to inform the landlord they want to proceed. If you are unable to agree on a purchase price, you must write to the landlord within 3 months of the offer and ask for an independent valuation.
Assuming the applicant meets all the eligibility criteria and the valuation is agreeable, a mortgage would need to be secured for the purchase.
What properties are eligible for the right to acquire scheme?
If you are looking to buy your rented housing association home through the Right To Acquire scheme, your property must be your only or main home and be a self-contained property. Additionally, it must either have been:
- built or bought by a housing association after 31 March 1997 (and funded through a social housing grant provided by the Housing Corporation or local council)
- transferred from a local council to a housing association after 31 March 1997
- Your landlord must be registered with the Regulator of Social Housing.
- The property must be in a reasonable condition and not subject to any legal agreements or restrictions.
Who is eligible for the right to acquire scheme?
The Right to Acquire scheme is applicable in England only, and those tenants living in eligible properties must also meet the following criteria:
- Be a secure tenant of a housing association
- Have been a public sector tenant for at least 3 years
- Not have a criminal record or owe money to the landlord
- Not own any other property
Right to Acquire cannot be used by those:
- being made bankrupt
- who have been ordered by a court to leave their home
- who are council tenants – Right to Buy may be an option instead
What discounts are possible with the Right to Acquire scheme?
While the Right to Acquire scheme gives tenants the right to purchase their home at a discounted price, the level of discount varies depending on where you live. Discounts between £9,000 and £16,000 off the price of the property could be offered.
The level of discount will be disclosed to you by the landlord when you make an application to buy your home under the scheme. If you have used Right to Acquire before then your discount could be reduced.
Why use a mortgage broker for a Right to Acquire mortgage?
A broker can help you by opening up access to lenders more likely to support your efforts at finding the most suitable Right to Acquire mortgage for your circumstances. Brokers, like When the Bank Says No, can access a range of lenders who are more willing to lend to those seeking this type of mortgage.
We’ll help you get together all the required documentation, such as proof of income and savings to support your mortgage application and answer any questions you may have about the process.
What is the difference between Right to Acquire and Right to Buy schemes?
Both are government schemes that allow eligible tenants in social housing to purchase their rental properties at a discounted purchase price – the difference being that Right to Acquire is for tenants of housing association properties while Right to Buy applies to tenants of local authority properties.
The discounts under the Right to Buy scheme are often higher, especially given that a council tenant will often have been in the property long-term, accruing a major discount based on the years they have been resident there.
What happens if I want to sell the property in future?
Both are government schemes that allow eligible tenants in social housing to purchase their rental properties at a discounted purchase price – the difference being that Right to Acquire is for tenants of housing association properties while Right to Buy applies to tenants of local authority properties.
The discounts under the Right to Buy scheme are often higher, especially given that a council tenant will often have been in the property long-term, accruing a major discount based on the years they have been resident there.
Do you have to pay back the discount on a Right to Acquire home if you sell it?
You are free to sell a property you have bought under the Right to Acquire scheme though there are implications if you do so within the first 5 years of buying. Anyone selling within the first year, will have to pay back the full discount amount they received.
This means, for example. that if you received a 12.5% discount, you will be required to pay back 12.5% of the selling price of the property.
The amount of the discount received that you have to pay back reduces for each year that has elapsed since the purchase.
The discount payback amounts if you sell the property within the first 5 years of the purchase date are outlined below:
Time elapsed since purchase | % of discount that has to be repaid |
1st year | 100% |
2nd year | 80% |
3rd year | 60% |
4th year | 40% |
5th year | 20% |
Paying back discount example:
- Tenant buys home under Right to Acquire worth £125,000
- Receives a 12.5% discount worth £15,625.
- Sells the property after 4 years for £142,000.
- 12.5% of the sale price of £142,000 is £17,500
- As the seller is in the fourth year, they would repay 40% of £17,750 which is £7,100.
Are some housing association properties exempt from the Right to Acquire scheme?
While the Government is keen for everyone in housing association properties to have the opportunity to purchase their own home, not every property is available under Right to Acquire. Some properties and housing associations that serve a specific purpose are exempt and sit outside the scheme.
This includes properties that are intended for use by vulnerable groups of people, such as
sheltered housing for the elderly or supported housing for people with disabilities. Additionally, properties that are part of housing regeneration projects often sit outside the scheme as do those that are in too poor a condition that they would require significant work before they could be sold.
If you think your property may be exempt from the Right To Acquire scheme, check with your landlord to find out what your options might be.
Can I buy under Right to Acquire as a joint application?
You can make a joint application for Right to Acquire. If you are eligible, you might be able to buy a property with the following:
- someone who shares your tenancy
- up to 3 family members who’ve lived with you for the past 12 months (even if they do not share your tenancy)
How you finance your purchase of the property is up to you. Some housing association tenants may have the purchase financed with help of a family member (though legal ownership should be in the hands of the named tenants), but in most cases people will need to secure a mortgage.
Applying for a joint mortgage for a Right to Acquire property will involve all the same stages as if you were applying for a standard joint mortgage. You should inform the lender that you are using the scheme when applying for a mortgage so that the most appropriate mortgage deals can be offered to you.
What criteria do lenders have when applying for a Right to Acquire mortgage?
Many lenders may not require a deposit from you as they will often use the Right to Acquire discount to cover the deposit. If you are able to provide a deposit, this will make your application stronger and potentially open up more mortgage deals and better interest rates.
Mortgage lenders will consider factors including credit score, current level of income and affordability, when it comes to carrying out checks on your suitability for a Right to Acquire mortgage. Factors such as being self-employed, having adverse credit or outstanding debts, can make your situation a little more difficult, but a broker from When the Bank Says No can help you with your application and find lenders more likely to lend to you.
It’s worth bearing in mind that you’ll have to consider the extra costs of owning a property, such as repairs and maintenance, that you didn’t have to pay as a tenant as these can also impact on your ability to afford mortgage payments and how you are viewed by many lender
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We found WTBSN after landing in a really tricky situation. We were out of term on our current mortgage and our existing broker had exhausted all options to re-mortgage due to the complex nature of our holiday let property (Grade II listed, timber frame construction and above commercial). Working under considerable time pressure due to the financial penalties being imposed by the existing lender, Brian was relentless in his search for a solution that would allow us to refinance a property that was on face value mortgageable. Thankfully, he didn’t give up and nine months later, we completed on the re-finance. We feel so fortunate to have found WTBSN and would like to thank Brian and the team sincerely for going the extra mile. We couldn’t have done it without you!
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