Right To Acquire mortgages
The UK government introduced the Right To Acquire scheme in 1996 to assist people renting from housing associations to buy the properties they live in as tenants.
On purchase, eligible candidates can get a discount on the property’s market value.
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Isn’t Right To Buy the same thing?
Right To Acquire is designed for housing association tenants only, whereas the older and more established Right To Buy is a government scheme initially developed for council tenants in properties owned by the local authorities.
Housing association tenants living in private, trust-managed homes that were once council properties have since been included as Right To Buy candidates, provided they rented the home before it changed hands. A council tenant cannot apply for a mortgage through Right To Acquire.
How does Right To Acquire help?
As a potential first-time buyer, you can regard yourself as quite fortunate if you qualify for either Right To Buy or the Right To Acquire scheme. Should they submit an offer to buy with Right To Acquire, housing association tenants receive discounts on the property values of their rented homes.
This discount will undoubtedly mean that mortgages will be easier to come by and more economical to repay.
How does qualifying for Right To Acquire work?
To qualify for Right To Acquire mortgages, you must live in a housing association home and have had a public sector landlord for a minimum of three years. A public sector landlord could be affiliated with a housing association, a council, the NHS trusts or foundation trusts, or the armed forces.
The property you live in needs to have been bought or built by a housing association after 31 March 1997 and funded with a social housing grant from either the local council or a housing corporation.
Alternatively, your home must have been transferred from a local council to a housing association since the abovementioned date. The property has to be self-contained, and you must use it as your primary or only residence. Your landlord also has to be registered with the Regulator of Social Housing.
Should your home and landlord meet the above eligibility criteria, and you’re not under an eviction notice or declaring bankruptcy, you will qualify for the right to apply for a Right To Acquire mortgage and discounted purchase price.
After meeting the criteria, what is the next step?
If you and the property meet the qualifying criteria for the Right To Acquire scheme, the next step is to complete the documentation to formalise an offer to buy. Visit the Government website and navigate the Right To Acquire page. You will find a lot of handy information to assist you with the process.
Locate and complete the Right To Acquire application form (RTA1), and deliver this to your landlord when the time is right. You can also submit a joint applicant to your landlord if somebody that shares your tenancy also wants to buy.
The other person will need to be on the tenancy agreement, except if they’re a family member (you can add up to three) who has lived with you for a year at least. Family members don’t have to be on the tenancy agreement but must be of legal age.
Your landlord must respond to the news within four weeks. If the landlord accepts your application, they are responsible for contacting a qualified surveyor and evaluating the property.
If your landlord rejects your application, they need to give reasons for their refusal to sell, but you are not allowed to appeal the decision. The landlord has the option to offer you an alternative property if they choose to, and it would be up to you to accept or reject the counter offer.
If your landlord is happy to sell, they will send you a price they are comfortable selling. The price should be supplied within 8 to 12 weeks, with the time frame depending on whether the housing association property is freehold or leasehold.
Your landlord will also tell you how much Right To Acquire discount you can expect to receive and how it gets calculated. Your received discount will depend on the property’s market valuation and where you live in the UK.
The Right To Acquire discount should range between £9,000–£16,000, but if you’ve used either the Right To Buy, or Right To Acquire scheme in the past, these figures could decrease. Once you’ve decided to move forward with your option to buy your rented property, you’ll need to start looking at ways to pay for it.
Investigating Right To Acquire Mortgages
Unless you’ve come into a windfall, you’ll need another way to fund the housing association property you’re buying through the Right To Acquire scheme. You’ll likely look into securing a mortgage to help with this.
With the popularity of Right To Acquire growing, most mortgage lenders on the market offer Right to Acquire mortgage options, while specialist finance advisors provide Right To Acquire mortgage advice to a growing number of new buyers.
Right To Acquire mortgage brokers
Selecting an expert such as Loan Corp with a proven track record will make your dealings with lenders more comfortable.
If you bypass the mortgage brokers and approach lenders directly, be aware that they all work with their own portfolios and will only offer you products and deals included therein. As such, you will limit your choices and could end up losing in the long run.
You will also be restricted when it comes to an application, with most mortgage lender criteria differing vastly throughout the application process. An exclusive mortgage expert, like those on our staff at Loan Corp, will provide mortgage advice and refer you to a specialist mortgage broker with access to a wide range of mortgage and their portfolios.
Mortgage brokers, in general, are in a far better position to find the best mortgage providers to satisfy your particular requirements.
Right To Acquire mortgage providers
Finding the best, affordable Right To Acquire mortgage is imperative for your future and your property. Considering your circumstances, your mortgage broker will refer you to the lender they feel will have the mortgages that will best suit you.
Most lenders can provide Right To Acquire mortgages. Depending on your credit history, how much deposit you can afford for your mortgage, whether you’re employed or self-employed and what mortgage repayments you expect, you could have the pick of the lot.
Unfortunately, most housing association tenants, and council tenants, are not in a position to be too selective, which is why professional insight, like that we’ll supply, is invaluable. Get a quote for your mortgage online, and one of our in-house experts will promptly contact you.
The Right To Acquire mortgage application process
Applying for Right To Acquire mortgages is not that different to applying for others, and the mortgage scheme requires much the same information.
You will probably be required to put down a mortgage deposit, but the deposit amount will depend on your other debts, credit approval rating, employment, and income. On average, a deposit between 5 and 10% of your property’s value should suffice, but this can change between lenders, depending on other criteria.
Every lender has its own policy, and some might be willing to accept your Right To Acquire discount in place of a deposit, although in these cases, the repayment terms may be more stringent. Most lenders will limit the deposit amount for a Right To Acquire mortgage.
Lenders differ on the percentage of a purchase price they will lend. Some are happy to lend the total amount, while others stipulate that the Right To Acquire discount must be at least 10% of the total value, or you’ll have to cover the difference. Some providers have an enforced 95% cap on any lending.
When assessing your application before having your Right To Acquire mortgage approved, the lender will carry out reference checks through one or more of the three largest independent UK credit reference agencies, TransUnion, Experian, and Equifax.
Should these reference checks, and other in-house checks they’ll conduct, turn up signs of bad credit, you will stand a chance of having your application rejected.
With many independent lenders, though, it could just mean that you have to pay a higher interest rate and, potentially, a larger deposit than somebody with a good credit score.
What checks are done during a Right To Acquire mortgage application
- Your income, including your disposable income: this check will define your debt-to-income ratio, which considers your monthly spending and any outstanding debts. Lenders typically work on three to four times your annual income as their lending maximum, but this can reach six times, depending on the lender.
- Your employment situation: Lenders consider whether you are permanently employed and if your annual income includes bonuses or commissions. Many lenders include these additional income types in the affordability assessment, but others don’t. If you have a variable income, it’s something to bring up with your broker before you apply.
- Your age: Lenders tend to have caps on the maximum age group they will lend to. Specific lenders will have no age limit at all, so if you’re elderly, it’s necessary to speak to an expert who can refer you to an appropriate lender. Retirees with a consistent income can secure Right To Acquire mortgages from specialist later-life lenders.
- Your credit rating: If you have bad credit issues, you’ll struggle more to secure a Right To Acquire mortgage, but this doesn’t mean you won’t find a lender who can help you. Some lenders accept borrowers with credit issues, but again, consult an expert who can point you in the right direction before applying somewhere.
What is the best course of action if you’re still uncertain?
Perhaps you’re unsure whether you’re in a position to buy your home or have doubts about whether you’ll be able to secure a mortgage. Maybe you’re still uncertain about the best way to proceed.
At Loan Corp, we specialise in helping people with these concerns. Our team of advisors will advise you on the Right To Acquire scheme and all of its mortgage intricacies and refer you to appropriate specialists to meet your needs.
Apply online below via our website or call on 0808 301 9509, and somebody, either via an online mortgage advisor contact or a face-to-face meeting with an expert, will help you to put a foot on the property ladder in the best possible way.