Buying Property with the Government Right-to-Buy Scheme

The right-to-buy scheme is a great opportunity for tenants in public housing to buy their home at a reduced price.  Since 2015, the length of time that tenants have to be in residence has been reduced from 5 years to only 3.  For England, the scheme is open to those whose property is worth up to £600,000.  20{ad28eec4422a9ec937dbcec6c1ecae403198d4fbc9cf1793b24254e46fa445ed} of the sale price is lent by the government, and buyers pay the state no interest or fees for the first 5 years after their purchase.

The discount is on a sliding scale according to how long they’ve been tenants.  For 3 years’ residency, they receive a discount of 35{ad28eec4422a9ec937dbcec6c1ecae403198d4fbc9cf1793b24254e46fa445ed} on houses and then get a discount of 1{ad28eec4422a9ec937dbcec6c1ecae403198d4fbc9cf1793b24254e46fa445ed} extra for every year after 5 years up to a maximum of 70{ad28eec4422a9ec937dbcec6c1ecae403198d4fbc9cf1793b24254e46fa445ed} (with a limit of £108,000 for London and £80,900 for the rest of England).  To purchase a flat, the discount is initially 50{ad28eec4422a9ec937dbcec6c1ecae403198d4fbc9cf1793b24254e46fa445ed} with an additional 2{ad28eec4422a9ec937dbcec6c1ecae403198d4fbc9cf1793b24254e46fa445ed} for every additional year over 5 years (up to a maximum of 70{ad28eec4422a9ec937dbcec6c1ecae403198d4fbc9cf1793b24254e46fa445ed}) with the same financial limitations as a house purchase. 

Although some mortgage providers might accept the right-to-buy contribution in lieu of a deposit, most lenders would expect homebuyers to have at least a 5{ad28eec4422a9ec937dbcec6c1ecae403198d4fbc9cf1793b24254e46fa445ed} deposit.  If you’re thinking of taking part in the scheme and meet all the eligibility criteria, it’s crucial that you start to savemoney for the deposit. 

In order to meet all your priority debts and save, it’s a good idea to think about your spending habits.  Before drawing up a budget, you should make a list of how you spend your money over a 2-week period.  Doing so will give you ideas of how to make savings.  For example, you might decide to bring food from home at lunch-time instead of eating out. 

Before taking the irrevocable step of applying for the scheme, you should also weigh up the additional costs of being a homeowner compared to being a tenant.  Apart from being able to afford to make the mortgage repayments without fail every month, you must also think about the associated costs of buying property.  Although you might not have to pay stamp duty as a first-time buyer, you’ll have to allow for the extra costs of a property purchase such as legal fees.  Owning a home can be more expensive than renting as you might be required to take out extra insurance such as buildings insurance and/or income protection cover.  You will also be responsible for all home maintenance and upkeep of the property.  Finally, you might lose some state benefits (such as Housing Benefit) because you’re no longer renting.  All of these factors have to be considered before you even make a mortgage application.  During this time, you also have all the other day-to-day living costs to pay.  Sometimes when money is tight, you might need a helping hand from Cashfloat.  A streamlined fast online application gives you money on demand whenever you need it the most.