Will the Help To Buy Scheme work in Harrogate?

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If you’re an avid reader of our local paper The Harrogate Advertiser you may have read this article about the remarkably low number of people who have managed to fully utilise the Help To Buy 

Just 16 first-time buyers across the district have used the Government’s Help to Buy Equity loan scheme due to a lack of homes being built.

The scheme offers a loan covering 20 per cent of the purchase price of a new-build property so buyers can secure a home with a five per cent deposit.

However, as the scheme only applies to new-build homes with a purchase price up to £600,000, Harrogate residents have been largely unable to benefit.

We thought we would take the time to share our own thoughts on the matter. There’s a lot of new legislation around at the moment around Right To Buy/Right to Rent/Help To Buy we thought it would be useful to make the 3 schemes more understandable.

Let’s cover Right to Buy first (a big topic) – and in our next blog “ Help to Buy “ we will talk more about the direct connection to the local Harrogate situation.

RIGHT TO BUY

We’re going to be looking at things from an overall UK perspective.

It’s rather complex legislation – but here are the key facts and questions.

A revamped “ Right to Buy “ scheme now offers council tenants in England up to £77,900 (or £103,900 in London) off the market price of their council home.

In a bid to help thousands of people “achieve the dream of home ownership” the Government has regenerated the “ Right to Buy “ scheme first launched by Margaret Thatcher in the 80’s.

Tenants across England can get up to £77,900 off the cost of buying their council home through the scheme, with the coalition government promising to replace each council property that is sold with new affordable social housing. The maximum discount in London is £103,900.

We can look at how the scheme has changed and explain how you can benefit from it if you are a council tenant.

Who qualifies for a Right to Buy discount?

To be eligible for the Right to Buy discount scheme you will need to have been a public sector tenant for at least 3 years; this means your landlord would have to be a council, NHS trust or housing association. This does not have to be in one continuous period or just in the home you want to buy.

You cannot apply for a Right to Buy discount if any of the following apply:

·        the property is not your main home

·        the property is not self-contained (you share a kitchen or bathroom)

·        you have an introductory tenancy rather than a secure tenancy

·        there is a court order saying you must leave your home

·        you are an ‘undischarged bankrupt’

·        you are being declared bankrupt

·        you owe money to creditors

Certain properties are also excluded from the Right to Buy scheme, usually if they are reserved for the elderly or for tenants who work in a specific public sector, such as firemen or the police. However, if you live in an ex-council house can that was sold to another landlord, a “Preserved Right to Buy” may still apply.

You can find out if you could buy your property through the scheme, using the GOV.UK website.

Can you buy with someone else?

You can apply jointly with someone you share your tenancy with or one to three family members who have lived with you in the past year.

How much is the Right to Buy discount?

The maximum discount available through the Right to Buy scheme has increased to £77,900 for properties across England (£103,900 in London boroughs).

The exact amount you will get will depend on how long you have been a council tenant, whether you live in a flat or house and the value of the property you want to buy on the open market.

The maximum discount for a council flat is 70% of the market value, but the discount starts at 50% for those who have been council tenants for 5 years and increases by 2% for each additional year of council tenancy.

The maximum discount for a council house through the right to buy scheme is 60% of the market value starting at 35% and increasing by 1% for every year you have been a council tenant.

Regardless of how long you have lived in your home, or how much it is worth on the open market, the maximum discount on offer through the Right to Buy scheme is £77,900 (£103,900 in London).

The maximum amounts increase with the consumer price index in April each year.

The Cost Floor Rule

The amount of money that will be deducted from your property could be capped by the Cost Floor rule.

This rule allows your landlord, in most cases your local council, to claim back money they have spent on repairing and maintaining your property over the past 15 years from your Right to Buy discount – even if you have not lived there the entire time.

How do you apply?

If you want to benefit from the Right to Buy discount increase and are a qualifying tenant you can start your application by downloading and completing an RTBI application form.

You will then need to send your application to your landlord who will have four weeks to tell you if you can buy your home (eight weeks if they have been your landlord for five years or less).

If your landlord is happy to sell you your home they will then send you an offer through a Section 125 notice. This will contain a formal valuation of your property including the price you will be expected to pay.

It will also set out details of the property, any known problems, the new right to buy discount rates and estimates of any charges that will be deducted from your discount.

Once you receive your Section 125 notice you will have 12 weeks to accept the offer or reject it and continue renting your home.

What if you disagree with the offer?

You can ask for an independent valuation from HM Revenue & Customs if you feel the property value has been set too high. To do this, you will need to write to your landlord within 3 months of receiving the offer to explain why you think it is too high.

Will you need a mortgage?

Purchasing your home through the council Right to Buy scheme is very similar to buying a property on the open market, except the home owner (in most cases the council) is able to offer a substantial discount on the price you have to pay.

However, this does mean that you will need to apply for a mortgage and put down a deposit unless you have the cash to purchase the property outright.

Many lenders will offer mortgages specifically tailored to Right to Buy applicants, although you should carefully consider all you different options when looking for the best mortgage.

Can you use your Right to Buy discount as a deposit?

Many mortgage lenders will let you use your Right to Buy discount as your deposit, meaning you will not need to save a deposit yourself. However, some lenders may still expect you to put down a deposit as well.

Can you sell your ex-council home later?

If you purchase your home through the Right to Buy housing association you may have to repay some or all of your discount if you sell it again within ten years.
The amount you would have to pay back would depend on how long you had owned the property when you sell:

·        Less than a year = all of the Right to Buy discount

·        1-2 years = 80% of the discount

·        2-3 years = 60% of the discount

·        3-4 years = 40% of the discount

·        4-5 years = 20% of the discount

·        5+ years = 0% of the discount

The market value of your home when you sell will also affect the amount you would have to pay back; this applies whether your property has increased or decreased in value. For example, if your home was worth £100,000 and you got a discount of £40,000 only to sell it for £110,000 the discount would be calculated as £44,000. So if you sold it 30 months after purchase you would repay 60% of £44,000.

You must also have to give your original landlord first refusal on the property if you sell it within 10 years.

If you would like to discuss the property marketplace in Harrogate then please come along and see us and enjoy a free no obligation chat about the Lettings and Sales services we provide. 

We are here to help  – and will be pleased to be of service. 

Charles. 

Charles

About Charles

This blog follows the residential Sales and Lettings market in Harrogate, Knaresborough and surrounding villages.You will find information, analysis and guidance here along with news about Harrogate. I’m Charles Myring working in the Myrings Estate Agents Ltd business alongside my son Simon , daughter Gemma and dedicated sales teams. If you're thinking of Selling / Buying / Letting / Renting property locally Myrings would be happy to assist.