Right To Buy No Deposit
A no deposit Right To Buy mortgage is a 100% loan to value (LTV) mortgage, which is an option for council tenants or housing association tenants looking to climb onto the property ladder without any readily-available money for a deposit.
The Right To Buy Scheme
Suppose you qualify for the Right To Buy scheme, introduced by the British government in 1980, to assist public sector tenants with securing their property.
In that case, you will receive a Right To Buy discount on the property value of your rented home should you have an offer to buy accepted by your landlord.
The preparation process to apply for Right To Buy ownership is as follows:-
- Work out whether you can afford to apply.
- Fill out the RTB1 application form and send it to your landlord.
- Wait 4-8 weeks for a response.
- While you wait, check your credit score through TransUnion, Experian, and Equifax. It’s free.
- Try to resolve any erroneous entries listed and make sure your name appears on the electoral register.
- Cancel any old, unused accounts without much activity.
- Prepare everything you will need for a mortgage application.
- Once you receive an affirmative response and valuation from your landlord, decide whether it’s acceptable and, if so, move to the next step.
- Apply here online to speak to an accredited Right To Buy mortgage advisor, like those available at Loan Corp, and evaluate your mortgage options with them.
Right To Buy Scheme Qualification Criteria
Any public sector tenant who believes they might qualify to buy their housing association or council property through the Right To Buy scheme should carefully consider the qualifying criteria listed below.
You will qualify for a mortgage through the scheme if you and the property comply with the following:-
- Your home is either council or housing association owned.
- Your home’s location is in England.
- You have a legal contract with your landlord and have had a public sector landlord for at least three years in total, not necessarily concurrently.
- The property you rent is your only or main home.
- Your rented home is self-contained, meaning you don’t share bathrooms or kitchens with anybody else not living in your home.
Right To Buy Lenders
This discounted purchase price makes it more affordable to secure a mortgage from one of the many Right To Buy lenders prepared to assist you in becoming a homeowner as a public sector tenant. Sometimes it helps this process even further if you can acquire a mortgage without putting down a deposit.
What are the benefits of a No Deposit Right To Buy mortgage?
Most lenders require at least 5% of a property’s value from a Right To Buy applicant as a deposit so you can purchase your home. You can use a right to buy mortgage calculator for indicative rates.
You will experience certain benefits through this type of mortgage:
Right To Buy discount
The Right To Buy discount that council tenants receive after successful applications make applying for mortgages cheaper and easier, as lenders can use this discount instead of a deposit. The scheme’s maximum discount percentages are as high as 70%.
No deposit
A no-deposit mortgage allows you to borrow the entire property value without needing an upfront amount.
No application delay
In modern times, it is often difficult to save a sum of money that would constitute a reasonable mortgage deposit amount. Purchasing a home without first having to save for a deposit means you can reduce the waiting period before submitting a mortgage application.
Less stress
Alternatively, you will be less stressed if you have savings but can still secure a no-deposit mortgage.
Are there disadvantages to a No Deposit Right To Buy mortgage?
All no-deposit mortgages have disadvantages:
Higher interest
No deposit amount means that interest rates will be higher than those that require a deposit. Administration charges like application fees and loan charges will also be higher.
Negative equity
If your house loses value, you may end up in a ‘negative equity’ situation where the loan amount exceeds the property’s actual value. If you sell the house in this situation, you’ll personally need to pay any difference between this and the outstanding loan amount yourself.
Guarantor risk
In certain circumstances, you may need to find a relative to act as a guarantor for your Right To Buy mortgage. This person should be somebody close to you with good credit and enough income. As a guarantor, and depending on mortgage stipulations, that person’s property or savings might be at risk.
How do you qualify for a No Deposit Right To Buy Mortgage?
Lenders that entertain no deposit Right To Buy mortgages generally apply the Right To Buy discount you receive towards the Right To Buy deposit instead of requesting a specific guarantee on the mortgage. This saving makes it far easier for a low-income public sector tenant to afford it.
Seek expert advice
This action will depend entirely on the Right To Buy lender you’re dealing with, so before you visit a lender, it makes sense to use a Right To Buy mortgage broker so you can explain your need to do this, and they’ll point you in the direction of a lender who can fulfil this request.
Loan Corp advisors will reduce stress by pointing you in the direction required to make your property-buying experience as hassle-free as possible. We’ll ensure you receive the right advice and the most suitable lender for your needs.
Is it possible to borrow more than the purchase price?
Through Loan Corp, experienced FCA-accredited mortgage advisors will provide sound mortgage advice to answer all your difficult questions.
Renovations upon purchase
Sometimes a council property requires particular renovations upon purchase, and there are mortgage lenders who will allow you to apply for extra funds for home improvements above the property’s price.
Legal costs
Our experts will identify no deposit Right To Buy mortgage deals from lenders comfortable allowing extra borrowing above the Right To Buy scheme purchase price while providing additional money to cover legal costs. Of course, this will depend on your financial situation and the lender involved.
Remember that the lender will probably check that you use any additional amount you borrow for the reason you’ve provided, so be sure to invest the money as you’ve stated.
No Deposit Right To Buy guarantor Mortgages
Earlier, we mentioned the guarantor option. Right To Buy mortgages that include a guarantor are a way to avoid paying a deposit while not using your Right To Buy mortgage discount.
Guarantor mortgages usually require a longtime friend or one of your family members to stand as a guarantor for your mortgage application.
Guarantor property
Your guarantor’s name would appear on your mortgage. The guarantor would need to agree to settle any mortgage repayments you miss while using their own property, equity or savings as security.
This way, lenders could make their money back or even repossess your guarantor’s home if you fall behind with your mortgage repayments.
Guarantor savings
Using a guarantor’s savings as security means that the guarantor would deposit a stipulated amount into the mortgage provider’s account with no possible withdrawal of the amount until after the repayment of an agreed-upon percentage of your Right To Buy mortgage.
Perhaps not an ideal solution
Depending on your relationship with your prospective guarantor, this is not always the most comfortable way to secure a mortgage deal, but it is sometimes the only option. It could be especially true if you have a bad credit score and your Right To Buy discount amount falls short of a lender’s requested deposit.
Why would lenders decline No Deposit Right To Buy mortgages?
No deposit Right To Buy mortgages have an increased chance of being declined if you have a bad credit history, a bad credit score, several other debts, and irregular or insufficient income.
Self-employment
Furthermore, much will also depend on whether the Right To Buy discount covers the expected deposit amount and if you have formal employment or are self-employed. Being self-employed marks you as a greater risk, and you will need to present in-depth historical financial information to get your mortgage approved.
Credit status
Lenders will require proof that you can afford your monthly mortgage repayment to get your No Deposit Right To Buy mortgage approved; lenders will first check with one or all of TransUnion, Experian, and Equifax, the leading independent credit reference agencies in the UK, to make sure your credit score is of the required level to proceed.
Lenders’ criteria
Although the feedback from these credit reference agencies is relevant, it is not the defining factor in many cases. Mortgage lenders have different in-house protocols with arrays of lender criteria that they use to define the suitability of their mortgage subjects.
What to do if you can not get a right to buy no deposit mortgage
If you are unable to get a no-deposit mortgage, there are still options available to Right To Buy property buyers:-
Joint mortgages
Buying your property with a spouse or family member allows you to save money and split mortgage payments. As long as you’ve been a housing association tenant (or council tenant) for the stipulated time to qualify, and your spouse appears on the tenancy document, you can apply for the Right To Buy scheme together.
In the case of a family member, they need to have been living with you for at least 12 months and must be of legal age to qualify.
Save up for a deposit
It might take longer than a no-deposit mortgage would, but another option is to begin saving to reach your dream of owning your own home. The longer you spend saving while living in the same public sector home, the greater your mortgage discount through the scheme will be.
Speak to an expert
Get a Loan Corp quotation and find out what other options you might have for your mortgage. Fill in an application form, and one of our expert FCA-registered brokers will contact you to help you find the best solution for your needs. With over 200 UK lenders on our panel, we have the expertise and experience to find the mortgage advice and answers for you.
FAQs
I don’t qualify for Right To Buy no deposit and can’t afford one. What can I do?
Consider that your rented home’s market value may decrease over time, and waiting to secure a mortgage through the Right To Buy scheme may be more beneficial to you in the long run. Be patient and start saving what you can.
I rent a property that is classified as “non-standard”. What can I do?
A minority of English council properties have thatched roofs, whilst certain housing association tenants may rent in highrises or tower blocks. Lenders sometimes consider these “non-standard” construction types as high-risk. Speak to a specialist like Loan Corp and we might be able to find a solution for your uncommon problem.
We can get you approved for a no-deposit mortgage within 24 hours, start now below:
https://www.ownyourhome.gov.uk/scheme/right-to-buy/applying/rtb1-application-form/