Get it right with Right to Buy!

The prospect of finding a Right to Buy (RTB) product can seem daunting for even the most experienced

The prospect of finding a Right to Buy (RTB) product can seem daunting for even the most experienced broker.

But an increasing number of tenants are utilising the scheme to turn their long term council properties into their homes. While the scheme has been seen as controversial in certain circles, it’s enabled clients on a lower income to access property and created a lot more opportunities for business.

Compared to the same quarter of last year, RTB purchases have increased by 21% in April to June.  Figures like this are a clear indicator of interest in the sector; but what is the RTB Scheme, how do clients qualify and how does specialist lending come into the picture? You have the Right to know…

What is the RTB scheme?

The RTB scheme is a government mortgage scheme that allows long term tenants of council properties to purchase them from the Local Authority /Housing Association at a discounted rate. Simply put, the council discounts a sum of money from the market value of the house, therefore reducing the deposit needed. In some cases a discount can mean that no deposit is needed at all.

The discount applied to the property depends on the amount of time that the client has been living at the property. The chart below highlights how the property type and time spent residing at that property can affect the discount available.

Years of residence Discount (House) Discount (Flat)
3 35% or up to £42,000 50% or up to £60,000
10 40% or up to  £48,000 60% or up to £72,000
20 50% or up to £60,000 70% or up to £84,000
30 60% or up to £72,000 70% or up to £84,000
40 + 70% or up to £84,000 70% or up to £84,000

 

How do I know if my client qualifies?

2015 saw a change to the eligibility criteria on RTB applications. Clients only have to be living as a public sector tenant in the council property for three years (instead of the original five). Bear in mind that this time period doesn’t have to be in the same property, but has to be continuous.

The Process

There are really only three stages to securing a RTB property.

ProcessRTB.jpg

Once you have the Section 125, you can apply for a mortgage or loan to cover the purchase.

RTB’s are similar to vanilla residentials

When boiled down to the bare bones of the transaction, a RTB mortgage is no different to a residential mortgage – in fact, a residential mortgage could be used to fund the purchase if the clients can provide a cash deposit.

Simple to do and incredibly lucrative, any savvy mortgage broker should be making an effort to break into this expanding market.

But specialist enough that you may need a hand

Until recently, only prime lenders entertained the thought of RTB, thus clients with adverse were rarely accepted on a RTB mortgage. As the appetite for these kind of deals has increased, more lenders are willing to offer products that cater for wider circumstances. Within the specialist lending market, products will cater to those looking to borrow the entire of the discounted purchase price (up to the maximum LTV) and will consider clients with a less than perfect credit score.

Being able to complete business for your buy to let clients requires knowledge, experience and access to products. This is where the team at Crystal really adds value, by working with you to complete more business for your clients.

If you have a RTB case that you’d like to discus, contact your local BDM and we’ll be happy to help!

 

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About Us

Crystal Specialist Finance is one of the most well respected and fastest growing finance distributors in the UK.

We offer specific expert advice, products, and award-winning service to brokers and networks across five core markets: Commercial Finance, Bridging Loans, Development Funding, Second Charge Loans and Specialist Mortgages.

Operating across England, Scotland and Wales, we have access to over 70 lenders, including exclusive lines.

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