Expat Mortgage Guide for Right to buy

Right to buy for Expats

Right to buy was introduced by Margaret thatchers government back in the 1970s and was intended to give people who had been renting their council property the right to buy it at discounted market prices. There were conditions that applied where you had to keep the property for a length of time and the discount you would receive was based on the length of time you had rented the property.

A large number of people have taken up their right and in the majority of cases have found their property rising very considerably in value.

It is very unlikely that the average expat would be renting such a property so the terms of this would only really be of interest to the expat where he or she had a family member who was currently living in a rented council property and may wish to give them support to purchase their home.

How does right to buy work?

When you purchase your house through the Right to Buy scheme, the process of obtaining a mortgage to purchase the property is virtually the same as buying any property through normal channels. The main difference is that with right to buy, you will be able to establish the final price as you will not be competing with others to purchase the property.

Having established the valuation for the property and deducted the discount that you are entitled to, you will know what you have to pay to purchase the property. There are a whole range of mortgage lenders who will provide Right to Buy mortgages and many of them will lend prospective buyers up to 95 or 100 per cent of the discounted price of the property.

Other costs to consider with Right to Buy

Buildings insurance – As you will now be the owner of the property you will want to protect your investment in the property and your mortgage lender will insist that you do. This means as a minimum, taking out buildings insurance based on the cost of rebuilding the house in case becomes a total loss through fire, flood or accident.

Repairs and maintenance – where the property is a Flat and communal property, which make up the majority of right to buy property, you will usually have to pay an annual fee to contribute to the repairs and maintenance of the building as a whole. This will be over and above any normal repairs and maintenance that you may wish to do.

Loss of housing benefits – It is also worth bearing in mind that buying your home through the Right to Buy scheme could affect any benefits you may be receiving. While you were a tenant, you may well have been eligible for housing benefit in order for you to pay the rent. However, once you become a property owner this benefit will no longer be available to you and you will need to finfd the money yourself to repay any mortgage you take out on the property.

Property value discounts – Should you find that you qualify for the Right to Buy scheme, you may be entitled to a discount on the purchase price of your house. In order to be an eligible applicant, you will need to have been a tenant in a public-sector property for at least three years. The longer you have been a tenant, the bigger the discount will be.


Who qualifies for right to buy?

To be considered for Right to Buy, you will need to have been renting a property as a public sector tenant with a secure tenancy agreement for at least three years. By public tenant, this means that your landlord would be your local council or a local housing association. A NHS trust could also be your landlord.

To qualify you must be able to show that the property is your main home and that it is a self contained property. This means that it is a completely independent unit having its own address, its own entrance and its own facilities such as bathroom, kitchen and utilities supplies.

To meet the requirements, you must also be able to show you are in good financial health with no accumulation of outstanding debts. If you are a declared bankrupt you may not qualify.

Further detailed information is available from the GOV.UK website.

If you are an expat with a family member that you believe might qualify for the scheme and you would like to help them to purchase their home, please fill in one of the appropriate mortgage forms on the site and someone will contact you.


Right to buy in joint ownership

The right to buy scheme makes provision for certain family members to purchase the property in joint ownership but only within certain restrictions. You cannot simply decide to purchase jointly with a friend who is not on the tenancy agreement and who is not a family member.  The following shows the acceptable joint ownership situations.

Joint tenancy agreement– where someone holds the tenancy agreement jointly wit you, that person will be ably to jointly purchase the property with you.

Spouse or civil partner – where you are living in the property with your spouse or civil partner, you may be able to purchase the property in joint ownership with them.

Other family members – where you have family members living with you and where they have been living there for the 12 month period prior to purchase, up to three of these family members may be able to jointly purchase the property with you. Note, while they have been living with you it must have been their main home.

Help to purchase – There are no legal restrictions on how you finance the purchase of your right to buy property and you might be fortunate in having family members or friends that would be prepared to help you. You may even find that if you are on the maximum discount you may have sufficient help to allow you to purchase with cash.

If you are buying with a mortgage and family members are helping you with the deposit, make sure you check the lenders criteria with respect to help with deposit money.


Selling your right to buy property

Once you have purchased your home under the right to buy scheme, there are some things you need to consider at the time of purchase.

Selling your property – If you decided to sell your property withing the first 5 years of ownership, you will be required to hand back some of the discount you received at purchase. The amount you will have to pay back will be a percentage of the discount percent you received on the market value of the property, reducing on an annual sliding scale. If you sell in the first year of ownership you will have to repay 100 percent of the discount and this reduces by 20 percent each year giving year2 at 80 percent and year 3 at 60percen etc., until zero percentage is reached.

Note: The discount that will be repayable will be based on a percentage of the open market value of the property at the time of sale and not the actual amount of the original discount. Any home improvements you will have made disregarded.

Council buy back – If you purchased your home on or after 18 January 2005, and you wish to sell it within the first ten years, you must first offer it back to the council or housing association at the full current market value of the property.

Council right of refusal – The market value must be agreed between the parties or, if they are unable to agree, will be determined by the district valuer. If the councilor housing association do not wish to buy the property then you would be free to sell the property in the open market.

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