When you hear about the Right to Buy scheme, your mind may travel back in time to the Margaret Thatcher era, back in the 1980s, but the scheme is still in effect and is helping many people today. Since its inception, it has undergone changes, especially since 2012, due to fears that the scheme was becoming unaffordable to many of those who wished to avail of it.
Eligibility requirements as well as discount rates have fluctuated over the years, and are continuously tweaked depending on the current economic conditions. With all these changes, it may all seem a bit confusing. What is Right to Buy, and how can it help you? Are you eligible? Here are some quick facts on Right to Buy mortgages. Are they for you?
What is Right to Buy?
The Right to Buy is a government scheme that was started in the 1980s to help more people be able to afford to buy their own homes. It makes it easier for eligible people to apply for a mortgage by providing easier terms and granting a generous discount on the property.
The price of the property depends on the market valuation, and the government then applies a certain discount to that amount. There are different variables involved in the calculation, but here are some general rules of thumb: after three years of tenancy, 35%, which increases by 1% per year after 5 years of tenancy. These rates are applicable for houses; for flats, the terms are the same but the rates are 50% and 2%, respectively.
The mortgage deposit
When you apply for a mortgage, the lender will require you to come up with a deposit. The advantage of the Right to Buy scheme is that the discount can be used as the deposit. This means you don’t need any savings of your own to get your application approved.
As with any normal mortgage, the lender will examine your income and your expenses, as well as your credit rating to see if you can afford the mortgage.
Is it for you?
You can only buy the residence you already live in and won’t be able to sell within 5 years, so it’s not necessarily for everyone.
There are, of course, alternatives to the Right to Buy mortgage for those who have a hard time or feel the scheme is not the appropriate one for them. Two other schemes – also implemented by the government – may sound more attractive, and they’re certainly worth investigating as well: there’s Help to Buy and Shared Ownership. If you feel these are still too restrictive, you may want to consider Low Deposit Mortgages. If you have the means of producing a deposit, however, your options open up considerably.
AS A MORTGAGE IS SECURED AGAINST YOUR HOME OR PROPERTY, IT COULD BE REPOSSESSED IF YOU DO NOT KEEP UP THE MORTGAGE REPAYMENTS.