Right to Buy Joint Mortgage
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Right to Buy Joint Mortgage
James Bull talks us through the key aspects of a joint Right to Buy mortgage.
How does a joint mortgage work under the Right to Buy scheme?
It’s important that the names on the mortgage application match the names on the section 125 letter – that’s the acceptance paperwork you get from the council. If somebody wants to apply for a joint mortgage, they need to make sure their offer letter is in the same names as the mortgage.
What are the eligibility criteria for a joint Right to Buy mortgage?
The main person on the section 125 acceptance letter would usually be the person named on the original council tenancy agreement.
You can make a joint application with somebody who shares the tenancy if the original tenancy was joint – or, if you’ve got up to three family members who have lived in the property with you for at least 12 months. In that case they can also be named on the section 125 as well.
Can you explain the process of applying for a joint Right to Buy mortgage?
The first step is to apply for the Right to Buy itself with the council. Once you’ve been accepted and have received the section 125 acceptance letter, you’re ready to apply for the mortgage.
The next step would be to contact us as a mortgage broker – we will find the right mortgage for your circumstances and help you apply.
How is the ownership of the property divided in a joint Right to Buy mortgage?
It’s no different to the ownership of any property you might buy. In England the main options are to buy the property as joint tenants or tenants in common. Which one is best for you is probably something to take legal advice on.
If you speak to the solicitor dealing with the purchase, they will be able to advise you on what the difference is and which one’s best for your circumstances.
What are the advantages of applying for a joint Right to Buy mortgage?
The main advantage comes when the main person named on the tenancy agreement isn’t in a position to get a mortgage by themselves, for whatever reason.
It could be due to their credit history, or their income might not be high enough to support the amount they want to borrow. Adding a second person onto the mortgage in joint names could be the boost that you need to get mortgage approval.
Are there any disadvantages or risks associated with a joint Right to Buy mortgage?
It’s not a disadvantage as such, but if you add someone else onto the mortgage, then that person also owns the house. Some people may perceive that to be a negative thing.
But obviously if the tenancy agreement is already joint, there is an existing relationship between you. Or, if you’re buying with a close family member you would expect them to be trustworthy, especially if they’ve already lived in the property with you for a year.
What documents are required for a joint Right to Buy mortgage application?
This can vary from person to person depending on their individual circumstances. As a mortgage broker, after we’ve had an initial chat with you, we will give you a personalised list of exactly what is required.
On a generic level, you will need proof of ID, proof of address, proof of income and if you are putting a deposit down, you will need proof of that deposit. The final requirement is your acceptance papers from the council – the section 125 agreement.
Can one applicant be removed from a joint Right to Buy mortgage in the future?
To remove a name from a mortgage, the person that’s staying on it needs to have the circumstances to support the mortgage by themselves.
Obviously the person being removed needs to agree to it, and sign papers when they come through from the solicitors. The best thing to do is for the person staying on the mortgage to contact us as a mortgage broker. We can make sure they’re eligible and obviously guide them through the process.
What happens to the joint mortgage if one applicant wants to sell their share of the property?
You can’t usually just sell a share of a property – both people would need to sell the house. Or, they can make an agreement for the person who’s keeping the house to buy the other’s share, if their circumstances allow it.
If you are looking at buying a share of a property then contact us as a mortgage broker and we can see if you’re eligible for that.
How does the Right to Buy discount affect a joint mortgage?
The discount is based on the circumstances of the named person in the tenancy agreement, so adding a joint name onto the mortgage shouldn’t make any difference to this.
Are there any additional fees or costs involved in a joint Right to Buy mortgage?
The fees should be broadly the same as on a sole mortgage. The main fees to account for are any broker fees or mortgage arrangement fees. Then there are the costs of the solicitor doing the legal work.
If the property is above a certain value, there’s the potential for stamp duty – but all of these are no different from a standard mortgage.
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Are joint Right to Buy mortgages limited to family members or can they involve friends or non-relatives?
The only way a non-family member could be included is where your original tenancy agreement was in joint names with a non-relative. As they’re on the tenancy agreement, they can go on the application.
Apart from that, it’s up to three family members who have lived with you in the property for 12 months. It’s probably best to ask the council who’s processing the application for you – they can advise you if there’s somebody you’ve got in mind.
What happens if there is a breakdown in the relationship between the joint mortgage applicants?
A mortgage is ultimately a long term commitment between the joint applicants. If there’s a breakdown in the relationship that does mean you have a decision to make.
The applicants could just sell the house and go their separate ways. That might be preferable, because it gives both people a clean break.
If one person wants to keep the house and change it into their sole name, the mortgage effectively needs to be assessed from scratch. We need to make sure that the person keeping the house can afford the mortgage in their own name.
Ultimately, if the lender is not happy with that and the owner doesn’t want to sell the house, the mortgage would just have to stay in joint names.
If somebody finds themselves in those circumstances, just contact us and we can give personalised advice for your circumstances.
How does the amount of each applicant’s ownership affect their responsibility for the mortgage repayments?
The legal term is that you’re jointly and severally liable for the mortgage payments. In plain English, what that means is that both applicants are 100% responsible for making 100% of the mortgage payments. It’s not split up 50-50. It’s 100% for both people.
Can a joint Right to Buy mortgage be transferred to a new property in the future?
When you sell a property, the mortgage on that property is closed. To buy a new property you need to apply for a brand new mortgage. Your circumstances will be assessed from scratch based on your current circumstances.
But if you’ve got a mortgage product like a fixed rate – which are very popular – then it’s possible that you could port that fixed rate from one property to a new one. There are benefits in doing that.
So again, if you are looking to move house, the best thing to do is contact us as the mortgage broker. We will give you advice on what to do in this situation.
Are there any specific conditions or requirements for a joint Right to Buy mortgage compared to other mortgage types?
The actual criteria to get a mortgage are broadly the same as any other mortgage. The main difference under the Right to Buy scheme is that you get the Right to Buy discount.
Practically all lenders accept that discount as your deposit for buying that house. So in the vast majority of cases you can buy the property without having to save for a deposit.
What options are available if one applicant does not meet the eligibility criteria for a joint Right to Buy mortgage?
The names on the section 125 agreement from the council do need to be the same as the names on the mortgage application. So if one applicant is not eligible due to credit history or whatever it might be, ultimately you’ll need to ask the council to remove that name from the section 125 agreement.
How long does it typically take to process a joint Right to Buy mortgage application?
There’s no real difference from a normal mortgage. It depends how busy the lender is and what the queues are like, but on average I would say it takes about a month to get a mortgage approved.
But the mortgage is just one part of a much longer process. Getting acceptance from the council can take a little while, and once the mortgage is approved the legal work can take another couple of months.
Can the joint Right to Buy mortgage be used for shared ownership properties?
In a word, no. These are two different schemes. Right to Buy is one scheme and shared ownership is a completely different one. They’ve got different eligibility criteria, so you can only have one or the other.
Are there any restrictions on how the property can be used or rented out with a joint Right to Buy mortgage?
Right to Buy mortgages are only available on a residential basis. The property has to be for your own personal use and you have to live in it yourself.
If you want to rent the property out in the future, once you’re out of your exemption period with the council, you can change your mortgage over to a Buy to Let and possibly rent the property out at that point.
But when you first buy, the mortgage would definitely need to be residential only.
Your home may be repossessed if you do not keep up with your mortgage repayments.
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