All About Right to Buy Mortgages

10-Aug-2007

Have you been renting a council property for more than two years? Do you wish to have a house you can call your own? Well, now you could realise your dream very easily, thanks to the Right to Buy Act introduced by the UK Government. In this article we provide detailed information on right to buy mortgages.

What is the scheme about?

The Right to Buy Mortgages scheme came into force in 1980. A right to buy mortgage basically means that any tenant who has been renting a council property has the right to purchase it at a discounted price. Council property refers to property that is owned by local authorities, non-charitable housing associations or even a housing action trust.

Who can it be useful for?

The right to buy mortgage scheme is very useful for people who have a poor credit history. Traditional modes of obtaining mortgages can be an uphill tasks for such people, especially when faced with situations like arrears on an existing mortgage, a default, a CCJ or even bankruptcy. We shall briefly explain each of these terms below:

-  Arrears: This refers to any outstanding payments or arrears to an existing mortgage. Having a background of arrears can often mean you'll find it very difficult to obtain a new mortgage through mainstream lenders.

-  Default: If you have been unable to make a payment on any loan, credit cards, etc., then chances are your credit file has been marked with a default notice. Such notices usually occur without the knowledge of the person. Unfortunately, it lowers your credit score, and it can cause difficulty in finding mortgages.

-  CCJ: If you have ever had a large bill amount that you could not possibly pay, it could result in a CCJ or a County Court Judgment. This is a record that is kept intact in your credit file for up to six long years, regardless of whether it has been cleared or not. However, if you do manage to clear the debt within a year, it will be marked as satisfied on the credit file, and this will raise your credit score.

-  Bankruptcy: People facing bankruptcy will not be able to apply for a mortgage as per the law. However there is a separate section of mortgage lenders who are sympathetic enough to grant loans to such people.

What kind of discounts are available?

A right to buy mortgage provides substantial discounts to potential homeowners. It serves to offer substantial discounts for those tenants who have lived in council property for over two years. For most people, getting a 50% discount is quite common. In addition, the scheme also allows for additional discounts to renovate an existing property. The percentage of discount offered will also depend to a large extent on the kind of housing it is.

-  Flats: Flat owners can be in for a pleasant surprise. The right to buy mortgage elaborates on the kind of discounts available for such tenants of council flats. After the completion of two years, flat tenants can avail a discount of 44%. Thereafter, with every passing year, an additional discount of 1% is applicable. A maximum discount of 70% can be obtained for such council flat tenants. Besides this, an additional discount may be available for the renovation of the flat

-  Other houses: For all other houses, tenants can avail a discount of 32% after having stayed for more than two years. Every additional year will yield a further discount of 1%. Such tenants can avail a maximum discount of 60%.

The right to buy mortgage has made the dream of having one?s own property a practical reality. It has enabled people with low credit scores or those who are in a poor financial situation to buy their homes at discounted rates. With a right to buy mortgage, most of the monthly mortgage payments are significantly lower than standard rentals. This can further contribute to a reduced financial burden on tenants.

So if you wish to purchase your dream home without having to shell out a lot of money, then this scheme is ideal for you. Not only does it take care of the financial constraints of people like you, it also allows the dream of owning your home to become a reality.

If you'd like to speak with someone about finding the best right to buy mortgage deal, take a minute to fill out the short mortgage contact form, and we will put you in touch with an experienced mortgage adviser from the SimplyFinance network. Your broker will work and search to find the best right to buy mortgage deal for you.