Right To Buy Mortgages

Right to Buy - Other Costs to Consider

Not only does a council tenant looking to use their right to buy have to secure the initial finance to fund the purchase, but the ongoing costs will also have to be considered and budgeted for. For many tenants, this will be the first time that the costs of ownership have become relevant and failure to take account of these costs could put the financial viability of the project in jeopardy.

Remember, if the mortgage payments are not met, you run the risk of losing your home, placing you in a worse position than if you had not exercised the right to buy, in the first instance. With this in mind, ensuring that ALL regular outgoings can be covered should be one of the most important checks to be completed, before exercising the right.

What Costs should a Right to Buy Candidate Consider
Most council tenants will pay a rent that is inclusive of both council tax and water. Once the property has been purchased, these bills must be paid, separately. Whilst technically, these bills are not new, when comparing the monthly cost of renting with the monthly cost of ownership, the rent should be reduced by the cost of these bills to give an accurate comparison.

Insurances will be an added cost that needs to be taken into consideration. All house owners need buildings' insurance which covers potential damage to the physical structure of the property. Contents insurance is highly advisable, although this is something that a tenant is likely to have in place already and is not, therefore, an additional cost.

Once a mortgage has been agreed, it is important to realise that you will be liable for the payments, even if you become ill and unable to work. Therefore, there should be insurance cover in place to deal with any unexpected event such as death or redundancy.

Other Financial Considerations
In the case of a flat, you will have to pay an annual service charge which is a contribution towards the maintenance of the communal areas. If you own a house, you will be responsible for your own maintenance charges, as and when they arise, and this can be both unpredictable and extensive. As a home owner, a contingency fund is important to deal with such eventualities.

What Effect will the Purchase of a Property have on my Benefits
For many tenants, housing benefit will be available to help with the rent. This will no longer be available to help with the mortgage payments. As an alternative, it may be possible to claim income support, although this is not payable for the first 39 weeks, after it is claimed.

Summary
Caution needs to be exercised when comparing the cost of rent and mortgage payments as certain bills are commonly included in the rent which will have to be paid separately from the mortgage;
housing benefit will no longer be payable to cover the cost of mortgage payments; and
costs such as repair, maintenance, service charges and insurance need to be taken into account.