Right to Acquire Mortgages

While many people are familiar with the Right to Buy scheme in England, did you know that there is also a Right to Acquire scheme, specifically for people renting from a housing association?

In this guide we’ll talk you through how Right to Acquire works, what discount you may be entitled to and how to get a Right to Acquire mortgage.

What is Right to Acquire?

Right to Acquire is a government scheme set up in 1996 to give qualifying housing association tenants the right to buy their rented homes. It’s similar to the Right to Buy scheme, but is specifically for housing association tenants rather than local council tenants and the discounts are significantly smaller, although still very much worth having.

Right to Acquire discounts range from £9,000 up to a maximum of £16,000, compared to the Right to Buy discounts at the time of writing of up to £84,600 or £112,800 for those living in London. The Right to Acquire discount is worked out based on where you live, and the government website publishes a full list of locations so you can check what discount you’d be eligible for. If you’ve used the Right to Buy or Right to Acquire scheme in the past this may reduce the amount of discount you can get.

There are mortgage brokers that specialise in helping customers who are using schemes like Right to Acquire, and speaking to one before you apply could significantly improve your chances of a positive outcome.

Eligibility criteria

The Right to Acquire scheme applies to a specific sub-section of housing association properties and to be eligible yours must either have been:

• Built or bought by the housing association after 31 March 1997, using a social housing grant or transferred to a housing association from a local council after the same date.
• The property must be self-contained and the landlord must be registered with the Regulator of Social Housing. If you’re not sure if this applies to your landlord, the UK Government’s website has a full list that you can check.
• There are also some eligibility criteria that apply to tenants individually…
• You must have been a tenant with a public sector landlord for at least three years
• The property must be your primary residence
• If you’re making a joint application, it must be with either someone who already shares your tenancy or a family member who has lived with you for at least a year.

What might stop you from qualifying for the scheme

You will not be eligible for Right to Acquire if any of the following conditions apply:

• You are being made bankrupt or have an outstanding court order against you to leave your home.
• You are a current council tenant – you may be eligible for Right to Buy in this case
• You have a ‘preserved Right to Buy’ – this means you were a council tenant when your property was transferred to a housing association and the Right to Buy option was carried over with you.

How to buy a property with Right to Acquire

If you’ve checked your eligibility and are keen to proceed, there are a few simple steps to take you through the process:

Find a specialist mortgage broker

Before you even make your Right to Acquire application you’ll want to know that financially you’re in a position to proceed. A broker who specialises in Right to Acquire mortgages will be able to check your eligibility, calculate your potential discount and then work out if you can theoretically afford a mortgage.

Make an application

The next step is to fill out the Right to Acquire application form, sometimes known as the RTA1, and to send this to your landlord. They have four weeks to say yes or no, (eight if you’ve been a tenant less than three years), and if it’s a yes they have a further eight weeks, (12 for leasehold properties), to send you a full offer. This could be for your current property or another empty one they own and will include a valuation, details of your discount, five years of service charge estimates and a full property description. You have 12 weeks to send back your decision and are free to pull out at any time and carry on renting.

Apply for a mortgage

Once your landlord has accepted your offer, it’s time to get the finance in place. Now you have exact details on your discount and purchase price, your broker will quickly be able to search for the best lenders to match your circumstances. Lenders will check that you can afford a mortgage by looking at your employment status, income, any benefits and existing commitments such as loans or credit card borrowing. They’ll also want to do credit checks to look for any credit issues.

Deposit requirements

The key benefit of the Right to Acquire scheme is that it allows housing association tenants to get on the property ladder by reducing the upfront costs of buying a house via the discount. Whereas buying a house outright normally requires a minimum 10% deposit, with Right to Acquire the discount is offset by lenders against the usual deposit requirements and sometimes does away with the need for a deposit altogether.

For example:

If you were buying a £150,000 house in the normal way, you might put down a 10% deposit and take out a mortgage for £135,000 – 90% of the value of the home. With Right to Acquire, you could get a £15,000 discount on a £150,000 home and still take out a mortgage for £135,000 – the lender is still only lending 90% of the property value, but your deposit is covered by the discount.

As we’ve already touched on, it’s potentially possible to get approved with no deposit to put down in advance as some lenders are happy to treat the equity you’ll get from the government discount as the deposit. But keep in mind that just because you can get a Right to Acquire mortgage with no deposit, it may not be the best option.

Putting down some of your own deposit helps to mitigate risk for lenders and means you can often get better interest rates.

Which lenders offer Right to Acquire mortgages?

While they’re not considered mainstream, there are a growing number of lenders who’ve seen an increased uptake in the Right to Acquire scheme and recognise that demand for Right to Acquire mortgages is increasing. Some of the high street banks are prepared to lend, as are many of the smaller building societies. Many will assess applications on a case by case basis, so you’ll have a bit more flexibility in terms of being able to explain your individual circumstances.

One of the important differences between lenders is what percentage of the discounted purchase price they are prepared to lend. Some will go the full 100%, others will lend up to 100% but with a proviso that your discount is at least 10% of the full value, otherwise they will expect you to make up the shortfall. Others impose a cap of 95% LTV regardless of the discount. Lenders will offer varied interest rates alongside these deposit requirements – your broker will be able to help you find the lender who can give you the best overall deal for your situation.

How credit issues can affect your chances of approval

If you have any concerns about your credit history it’s best to raise these with your broker right from the start – they will come out at some point and it’s best to be prepared. Although many lenders will decline a Right to Acquire mortgage application based on bad credit, there will be specialist lenders who will be open to your application and your broker will be able to find these for you. Being able to put down a larger deposit can be useful, but you may still need to accept higher interest rates.

Don’t be tempted to try to hide credit issues – if you have an application declined based on your credit checks then this will only further damage your future chances.

Get matched with a specialist Right to Acquire mortgage broker

One of the simplest ways to make sure you’re getting a great deal on your Right to Acquire mortgage is to work with a broker who specialises in the scheme. They’ll have an in-depth knowledge of the Right to Acquire eligibility requirements and the lenders who offer Right to Acquire mortgages and so can help reduce your risk of having an application declined.

If you approach a lender directly you really do limit your options as they’ll only be able to offer you products from within their own range. All of the advisors we work with have access to every mortgage product on the market, so they can quickly match you with the best deals based on your unique circumstances.

Call 0808 189 0463 or make an enquiry and we’ll set up a free, no-obligation chat between you and a specialist Right to Acquire mortgage broker today.