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A growing number of people are interested in the benefits of Right to Buy and Shared Ownership schemes, which potentially offer a more affordable route towards home ownership.
However, because of how the schemes work, there can be some uncertainty about using these types of properties as security against a secured loan. Or if you are the owner of an ex-council house, you may be unsure if lenders will accept it as part of a deal.
We cover all of that and more below, giving you clarity on where you stand and what to expect during your application.
If you are the owner of an ex-council property, then this can be used as an acceptable form of security by lenders.
Ex-council flats are usually accepted but come with specific restrictions such as minimum valuation requirements or LTV limitations, as lenders need to establish that you have enough available equity to cover the value of the loan.
While some lenders may have specific valuation requirements or LTV limitations in place, you stand a good chance of getting an offer if you are also able to meet the rest of their eligibility criteria.
Most lenders are open to letting customers use flats that are in high-rise blocks of flats, so this should hopefully increase the number of options available to you.
When assessing your application, lenders will want to know more about what floor the flat is located on and how many stories the building has.
The location of the property is also important as certain areas, such as Greater London, may be given exemptions.
If a referral is needed for your application, this is something one of our expert advisors can explain in more detail when you get in touch.
The Right to Buy scheme in the is a government initiative that allows eligible council and housing association tenants to purchase their homes at a discounted price. The discount varies depending on the type of property and the length of tenancy
Many secured loan lenders will allow you to use a Right to Buy property as security, although there are some variations depending on the status of the pre-emption period.
The pre-emption period refers to the first 5 years you have owned the property. If you sell within this period, you will be asked to repay some or all of the discount, which will impact the equity valuation.
There are lenders that do not account for the pre-emption period and will use 100% of the property’s open market value instead.
Either way, most secured loan lenders will ask you to supply an offer notice (also known as a section 125 notice) to confirm that the landlord acknowledges your right to buy.
If your 5-year pre-emption period has finished, you can still use your Right to Buy property as security, the application will be processed in the normal way.
Please get in touch if you need more details about using a right to buy properties for a secured loan and one of the Willows team will be more than happy to answer any questions you have.
A flying freehold property – which either overhangs or lies beneath someone else’s property (without necessarily being attached) – will usually be assessed based on how far it extends into the nearby property.
For some lenders, this typically ranges between 10-25% of the total property area. But even if your flying freehold extends further, this won’t instantly mean you are not eligible for a secured loan.
There are other factors that the lender will take into consideration, such as the market value, your affordability and credit score, so after all of this has been taken into account, the lender may still be open to offering you a loan.
People interested in taking out a secured loan to ‘staircase’ or repay the equity on a Help to Buy should be able to find a lender that is willing to help.
The term ‘staircasing’ refers to the process of gradually buying more shares in your property at an affordable pace until you reach 100% ownership.
The Help to Buy scheme is now closed to new applicants, but existing members were previously allowed to borrow between 5-20% of the value of a new-build home (up to 40% in London) and repay it over a fixed period.
There may be specific requirements and terms in place for this type of loan, which varies from lender to lender, so a member of our team can explain more about the processes and documents that are likely to be involved.
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We’re extremely proud to be rated ‘Excellent’ for our service standards. We’ve helped thousands of customers across the UK over the last 15 years to find the right finance for their needs – no matter how complicated the circumstances. And we look forward to helping you.
No matter the type of property that you own there is usually a way to find a lender that has the right level of experience and know-how.
At Willows we pay close attention to the small details, which gives us the edge when it comes to matching you with deals and offers that fit your needs.
There’s lots of ways we can help, whether it’s answering specific questions about your loan or giving you support through the application process. To find out more, get in touch with us today and speak with one of our experienced advisors on 01656 766 158.
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Willows Finance Limited
Brocastle, Bridgend, CF35 5AS
Authorised and regulated by the Financial Conduct Authority
Firm Reference Number: 670052
Company Number: 6678545 (Registered in England and Wales)
This document outlines the services we provide. If you need clarification, please contact us at 01656 766158.
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Other finance options may include:
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We are not independent financial advisers. Free debt advice is available from the Money Advice Service.
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We charge a broker fee upon loan completion. The average fee is approximately 5%, depending on your situation.
Fee details:
No refund is offered after completion. You may pay upfront or add the fee to your mortgage. Fees and commission will be detailed in your ESIS and Mortgage Agreement.
You will receive a Mortgage Agreement and an ESIS document detailing:
You may cancel your application anytime before completion without any charge. Mortgages cannot be cancelled after completion.
Missing payments can lead to charges, repossession, and negative impacts on your credit rating.
Consolidating debt may result in higher long-term interest. Securing debt against your home increases risk.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loan secured on it.
If you wish to complain, contact us at:
Willows Finance Limited
Brocastle, Bridgend, CF35 5AS
Tel: 01656 766158
You may be able to refer your complaint to the Financial Ombudsman Service.
We are covered by the FSCS. You may be eligible for compensation of up to £85,000 per person per firm for mortgage advice and arranging.
More info: www.fscs.org.uk
After processing your application, you’ll receive a Mortgage Agreement and have a 7-day reflection period.
Contact us during this period with any questions. To proceed, sign and return the agreement.
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