Right to Acquire

What’s the difference between Right to Acquire and Right to Buy?

Right to Buy is when you’re buying a council house. If you rent from the council and you’ve lived in that property for a certain period of time, you qualify for Right to Buy. Right to Buy gives you a discount when buying the house you’ve been renting from the council.

A housing association also offers you the ability to buy the property at a discounted rate. It’s very similar to Right to Buy, but with a housing association it’s known as Right to Acquire.

Who is eligible for a Right to Acquire mortgage?

This is for somebody that rents a property from a housing association who has lived there for a certain period of time. They can apply to purchase that property under Right to Acquire once they’ve lived there for the qualifying length of time and paid all their rent.

The discount is very much based on how long you’ve lived in the property and the rent you’ve paid. If you’ve lived there for 20 to 25 years, the discount will be significant. You may also find that if you’ve lived in a housing association property prior to this particular home, that could still qualify.

In the first instance, you would speak to the housing association and see whether this is available. They would look at your circumstances to work out the discount, and send a valuer to the property to establish what it is worth. They may then offer you the ability to purchase the property at a discounted rate.

How does the Right to Acquire discount affect my mortgage application?

If, for argument’s sake, you were getting a 20% discount and the property value was £100,000, you’re buying the property for £80,000.

The lender knows that there’s plenty of equity in the property, which is good for them as there’s some security in it. The bigger the discount, the better.

Which lenders currently offer Right to Acquire mortgages?

The majority offer Right to Acquire – it would be down to the mortgage broker to look at the deals available, and which works out the most beneficial for that client. Once we’ve worked out which is the most beneficial, we would arrange it through that lender.

How much deposit do I need with a Right to Acquire mortgage discount?

In some cases, you don’t need a deposit at all. In my earlier example, where you’re buying a house at £100,000 and the housing association gives you a 20% discount, you could actually borrow £80,000 without putting any money in.

I’ve just done one of these in Oldham. That client decided not to put any money in himself and used Right to Acquire through the housing association he rents from. He was offered a really good percentage discount.

He does have some savings, but the house needs work as it’s a bit tired. He decided to use those savings to cosmetically update the property – putting in a new kitchen and bathroom because it’s now his own house. He hasn’t actually had to put a deposit down to the lender.

How is affordability assessed for Right to Acquire mortgages?

It‘s exactly the same as on any other mortgage. They would look at your income and expenditure – like loans, HP, finance, credit agreements, credit cards and store cards.

They would look at your income, accounting for overtime and any bonuses. If you’re self-employed, they look at your basic salary and dividends or net profit. It’s exactly the same as any other mortgage.

Also, the affordability is based on the £80,000 you’re borrowing, rather than the £100,000 purchase price.

What happens if my property is valued higher than the Right to Acquire price?

It will be – because it’s been valued at £100,000 but you have the ability to purchase at £80,000. You’re buying the house at £20,000 under the asking price because of the discount. In every case, the valuation would be higher than what you buy it for with the Right to Acquire price.

Are interest rates different for Right to Acquire mortgages compared to standard ones?

No, they are exactly the same. If you’re a first-time buyer you would still qualify for any special rates. It’s just a case of shopping around for the lender.

With Right to Acquire and Right to Buy, the discount is offered on the condition that you can’t sell the property for five years. If you sell that property within a five-year period, you would pay a percentage of that discount back – and it would be much greater if you sold it in year one. You would pretty much pay all the discount back.

If the property was valued at £100,000 and you purchased it at £80,000 as the Right to Acquire price, you’ve got a £20,000 discount. If you sold it in year one for £100,000, you would end up paying the discount back to the housing association.

But if you sold at the end of year five, you would keep the full sale price. You wouldn’t need to pay anything back.

Can I remortgage or sell the property after buying through Right to Acquire?

Yes, you can, but as I mentioned, you would have to pay some of that discount back.

When arranging a Right to Buy or a Right to Acquire mortgage, we would usually choose a five-year fixed rate. You’ve no intention of selling that property within the next five years, so there’s no point doing a two or three-year fixed deal.

You won’t need to remortgage, and you can’t sell it for the next five years without paying a big penalty. At the end of five years, we look at your circumstances and decide what you want to do next.

So, yes, you can remortgage within that five years, but depending on how you set up the mortgage in the first place, it probably isn’t required.

What restrictions or conditions apply if I buy my home with Right to Acquire?

If you sell that house within the five-year period, you will pay a percentage of that discount back. That’s the big one.

They’re not designed to rent out, either, so you can’t get a Buy to Let mortgage. Right to Acquire is intended to get first-time buyers into home ownership – so they’re heavily discounting the price. The intention is not to rent the home out; it’s for your own occupation.

How can a mortgage broker help here? Anything else to add?

Chatting through your circumstances with a mortgage advisor can be a big help. We will talk to you about everything, steer you through and make it all a bit less complicated.

Purchasing via Right to Acquire means dealing with the housing association’s legal team or solicitors, which isn’t like using your own solicitor. They can be slower than normal and can be frustrating to deal with – they don’t always return calls. I’m speaking from experience, with this mortgage I’ve just done in Oldham, so let us help you.

Key Takeaways:

• Right to Acquire is for purchasing a property from a housing association, while Right to Buy applies to council houses. Both offer discounted rates.
• To be eligible for a Right to Acquire mortgage, you must rent a property from a housing association, have lived there for a qualifying period, and paid all your rent.
• The discount reduces the purchase price, which can be beneficial for lenders as it provides more equity in the property.
• Affordability is assessed similarly to other mortgages, considering income and expenditure, but it’s based on the discounted borrowing amount rather than the full purchase price.
• If you sell the property within five years, you will have to pay back a percentage of the discount. Additionally, Right to Acquire properties are not designed to be rented out; they are intended for the buyer’s own occupation.