No Deposit Right to Buy Mortgages

If you’re planning on swapping tenancy for home ownership through the Right to Buy scheme, it’s up to you to finance your own council home purchase. You’ll need to know exactly what the situation is with deposits, especially if you don’t have any funds saved towards one.

The good news is that more than half of lenders now accept Right to Buy applications. This guide will focus on whether it’s possible to get such a mortgage without putting a deposit down, what lenders are willing to offer, and it will help to point you in the right direction so you know where you stand.

Is it possible to get a Right to Buy mortgage without a deposit?

Yes, it is. Some lenders who provide these mortgages offer 100% loan-to-value options. This means that you will get a loan on the full amount of the property, minus the discount.

• Example: If the open market value of a property is £100,000 and you qualify for a £35,000 discount, you can get a loan on the remaining £65,000 in full, and you will have no deposit to pay.

A handful of lenders offer 95% mortgages after discount, however some lenders are not willing to go as high and have their own specific restrictions in place, so it is always advisable to get help with searching the market to find one that will offer you the whole balance.

A number of lenders who provide 100% mortgages also offer other loan-to-value ratios, such as 75% or 80%, so if you do have savings you can put towards a deposit this might put you in a better position by having access to better interest rates and mortgage products.

How to use the Right to Buy discount as a deposit

If you’ve already done some reading up on this scheme, you’ll know by now what the discount stands at, although it’s always worth checking what the latest rates are in case of recent inflation. Our calculator below can do this for you.

Once you know what discount you’re eligible for, you will then know more about how much you can borrow. This discount could be used as a satisfactory deposit for some lenders, which is a huge boost to anyone on a low income or those with no savings behind them. You will need to find a lender who will offer a 100% loan-to-value Right to Buy mortgage, and there are a good number of them out there if you know where to look.

How a broker can help with this

Understanding all of the factors involved with this scheme can be daunting. There are many rules and restrictions at play, and it can be impossible to know where to turn first to secure the right mortgage without a cash deposit.

Landlords are not permitted to advise or recommend mortgage lenders within the Right to Buy scheme, however you are able to get impartial guidance from a professional broker with expertise in this area instead, and this is what we would recommend.

If you go direct to lenders, you will be restricted to only learning about their individual products, rather than what’s out there in the entire market. But a broker who specialises in Right to Buy mortgages will offer information on costs and mortgage types from a wide variety of lenders who suit your circumstances, which in turn will make you more likely to be accepted.

Which lenders offer no deposit Right to Buy mortgages?

There is no way to predict which lenders will offer the best deals. Our investigations reveal both big players and smaller lenders equally opt in and out of the scheme. The most important thing is having access to those that provide the best package that you’re eligible for.

An example of lenders who currently offer 100% loan-to-value and their criteria:

• TSB: Will lend up to 100% of discounted purchase price, but if the discount is less than 10%, you will need to make up the difference.
• Chorley Building Society: Will generally grant up to 100% of discounted purchase, providing the advance does not exceed 75% of the market value.
• Skipton Building Society: Will lend up to 100% of the discounted purchase price, restricted to the product’s maximum rate.
• Halifax: Loans up to 100% accepted, provided they do not exceed the lending limits based on the bank’s valuation. Funds released for home improvements.

One thing to bear in mind about lenders is that approaching one direct is not recommended. This would restrict you to just one set of products and decrease your chances of landing the best rate on the market. Using a whole-of-market broker is a better alternative.

Restrictions, criteria and extras

Getting a Right to Buy mortgage involves the same eligibility criteria as any other: you will be expected to prove your affordability for borrowing, and your spending, income and credit background will all be taken into consideration.

There are also restrictions with this kind of mortgage to bear in mind when it comes to the deposit you might need. There are minimum and maximum requirements, capped loans and potential shortfalls to make up, all of which depends on the lender you go with. Here are a few examples of some restrictions:

• If your Right to Buy discount is less than 25% you could be required to cover the shortfall
• If you had adverse credit satisfied in the last three years, your maximum loan-to-value cannot exceed 70%
• Maximum loan-to-value can be restricted to 65%, 75%, 80% or 90% of the total market value of the property
• Maximum borrowing can be capped – some go up to £250,000
• Some buyers will be asked to contribute 5% towards the discounted purchase price

Optional extras

Most lenders will not offer anything above the loan-to-value cap, however some are incentivising their products by offering extras such as an additional 10% or £5,000 up front for immediate home improvements or funds towards house buying costs.

Get matched with a Right to Buy mortgage specialist

Having trust in your broker to hold your hand through such a life-changing process is vital. They can offer support, unbiased advice and guide you through your application with ease. The Right to Buy mortgage brokers we work with are fully vetted, fully trained by us, and have surpassed our compulsory five-star rating.

We only put you in the best possible hands, and no matter what your unique circumstances are, we can match you to the most suited expert in Right to Buy mortgages. Call us on 0808 189 0463 or make an enquiry online for a free, no-obligation initial call to find out more.