For some, selling a home is about relocating to a new area, downsizing or upgrading to something more spacious. For others, it’s a carefully calculated financial decision. In both instances, there’s heavy debate as to whether or not those who bought their homes under the Right to Buy scheme should be allowed to sell or let their properties.
But what does the right to buy mortgage mean? It’s a government program that offers substantial discounts on house purchases for council tenants. It was introduced by Margaret Thatcher in the 1980s and remains popular today. The reason is that even if you don’t have much savings, you might be able to use your discount to buy a house with less money down. That is why, many people often consider the option of the right to buy mortgages.
In a nutshell, after living in a council property for at least three years, qualifying tenants have the option of purchasing their home at a heavily discounted rate. (Note that this scheme is primarily beneficial for council tenants, who have a history of living in a council property for long years.) With discounts of up to 82,800 (increasing to 110,500 for qualifying properties in London), Right to Buy can make property ownership much more affordable.
But does this mean that qualifying buyers should have the same selling and letting rights as everyone else?
If you’re offered a huge discount on the market value of your home, you could end up with an asset worth far more than you paid for it. After a specified period of ownership, you could rent out your Right to Buy property or potentially sell at a significant profit and pay off any mortgage taken out to arrange the purchase.
It’s a controversial issue the government is very much aware of, which is why restrictions have been placed on post Right to Buy property sales.
Letting Your Right to Buy Property
Interestingly, there are no specific restrictions whatsoever on letting out a Right to Buy property. Just as soon as the purchase process has been completed, the owner can determine the rental price. This is why thousands of former-council properties are added to the UK lettings market each year.
Some have criticised this apparent ‘profit-making model’ as counterproductive, but it remains the right of every Right to Buy homeowner. At least, for the time being.
Selling Your Right to Buy Home
In terms of selling a property purchased under Right to Buy, it’s not quite as simple. If you intend to sell your home within 10 years of purchasing it through the Right to Buy scheme, under no circumstances can the property be put on the market, without first offering it back to the local council or another social landlord in the area.
If the landlord doesn’t indicate their intention to purchase your home within eight weeks, you are then free to sell it via the usual channels.
However, a proportion of the discount provided under the RTB scheme must be repaid, if you sell your home within five years of buying it. During the first year, you will be required to pay back 100% of the discount. After which, the discount amount you will need to repay if you sell your home is reduced to:
- 80% of the discount in the second year
- 60% of the discount in the third year
- 40% of the discount in the fourth year
- 20% of the discount in the fifth year
It’s therefore perfectly possible to sell a Right to Buy home at a profit, but it’s important to carefully consider how much of the discount you will be expected to pay back. If you’re not looking to sell your home as a matter of urgency, it could be beneficial to delay the sale, in order to reduce the amount you have to repay. As one of the biggest decisions you will ever make, it’s advisable to seek independent support and consultancy, before beginning the process of buying or selling your home.