Right to acquire query

Gemandcraig

So we have filled in the form to buy our housing association home. The property valued at £110k, £9k discount after that. Does that mean we only need a 1% deposit or will we still need 10% more meaning we need 11k.

Also another question it says we cannot sell the house within 5 years however what about renting it out after say 4 years?

The house is 3 bedrooms which is fine for now but in the future we do want more space. We are in a position to be paying around £1k a month on a mortgage hoping to pay the mortgage off in 10 years hence it being a good long term investment. We have children so its possible we could pass it to them eventually so this makes sense for the long term.

Advice appreciated
Gem

Pixie5740

Some lenders will use the discount as your deposit. I'm not sure about letting the property. I know that RTB doesn't prevent people from letting the property out after buying it so I assume RTA would be similar.

You need to keep in mind that should you decide to upsize homes in the future whilst keeping this property you will need to pay an additional 3% SDLT.

artyclarty

Depends on your housing association. Our local one forbids any form of letting within the first 5 years and also first refusal on purchase for between 5 and 8 years, which is nice as it means the housing stock generally remains housing association unless they are intending to stay put for a long while.

They are rather strict on the letting out part before 5 years - one in our street at the moment got caught by the HA (bought and immediately rented out) and they are now attempting to get the discount back, plus legal costs. They also failed to attain a buy to let mortgage which the mortgage company found out about, they failed the criteria to switch to buy to let and are now having repossession proceedings started against them too!

Also claiming that it is their sole residence and that they are single and unemployed (neither true) with multiple dependants (well that's at least true!) so the benefits lot are after them as well...

I think this is a bit of an extreme case, but please make sure you check any terms that your housing association will stipulate.

Mortgage - depends on the lender as Pixie says. Don't forget you will also need fees upfront for solicitors and perhaps a building survey. HA properties even if they are well maintained are not always the best constructed as I found out...

sparky130a

Gemandcraig wrote: »

The house is 3 bedrooms which is fine for now but in the future we do want more space. We are in a position to be paying around £1k a month on a mortgage hoping to pay the mortgage off in 10 years hence it being a good long term investment.

I have to ask, what the hell are you doing in social housing?

Cakeguts

An housing association house is still going to be an ex social house even if you buy it so you will be limited as the the kind of tenants who might want to rent it.

If you are thinking of letting the property after 5 years you are likely to do better in terms of tenants if you buy now on the open market. Save as much as you can and put down a deposit on an open market home and then in 5 years if you want to let it you should have a much less trouble with tenants. You should also have much less trouble selling the house if you want to. You are unlikely to get the same amount of money for an ex housing association 3 bed house as you would for an open market one. So if you can afford it it makes more sense to buy on the open market than to buy the housing association house with the discount. If you get the wrong kind of tenant your discount now could be completely used up with repairs. A nice open market 3 bed house will give you a better choice of tenant so your repairs could be a lot less.

It might feel now as if you are saving £11k but because of your future plans this may not be the case.

Gemandcraig

What do you mean open market?

The area we live in is lovely - We would not struggle to rent a property out around here.

We would love to afford to buy another larger house and we can afford to pay the mortgage monthly however banks dont look at us like that - because only my partner is working we can't get a £160k mortgage and we dont have a £16k deposit so even though we are good with money and have no debts and could afford repayments we still cant get a mortgage for an open market house.

Cakeguts

Gemandcraig wrote: »

What do you mean open market?

The area we live in is lovely - We would not struggle to rent a property out around here.

We would love to afford to buy another larger house and we can afford to pay the mortgage monthly however banks dont look at us like that - because only my partner is working we can't get a £160k mortgage and we dont have a £16k deposit so even though we are good with money and have no debts and could afford repayments we still cant get a mortgage for an open market house.

It isn't anything to do with the area as much as to do with the origin of the house and whether any other houses are still rented by housing association tenants. That is what makes a difference to who chooses to rent an ex housing association house privately. Housing association houses are social housing and good tenants don't want to rent ex social housing regardless of how nice the area is if they can get a house that has never been a housing association house. Good tenants would much rather rent a property that has never been social housing. If you are relying on the income from a let property you don't want one that only attracts tenants who don't pay the rent, or wreck the house. You also don't want the house to be vacant for long periods of time.

It is easier to let a house that has always been privately owned than a house that has been social housing especially in an area where 3 bed houses cost £160k on the open market.

da_rule

You can sell the house within 5 years, you just have to repay some (or all) of the discount. You also have to offer the house to the housing association before you can sell it on the open market (for the first 10 years).

There are no provisions in the Housing Act that would allow a housing association to put any covenants in the transfer to restrict what you do with the property. And certainly under right to buy, I've come across people who have purchased houses on a Friday and had tenants moving into them on the Saturday. Regardless of the morality of it, it is was the law allows.

G_M

The whole RTB/RTA is poorly considered and poorly executed leglislation.

But that's another topic.

Gemandcraig

I agree about the tenants situation - but there are many areas in our local area where social area tenants like that would want to live above living around here - Its miles out of town and a small village. Its also the most expensive village to buy a house in our town so its quite popular although i understand what you are saying. The other social housing properties in worse areas than this are going for 130k so it makes sense to buy here although you say area doesnt matter too much - I think it matters alot.

We will probably be here for 5 - 7 years anyway.

Another question - after 7 years if we release equity what does this mean?

If we wanted to buy another house in 7 years would we need another deposit or can we use this property as collateral against another house purchase?

Thanks
Gem

Gemandcraig

While i do kind of agree with you its a good way to get on the property ladder - Unfortunately banks will not lend us the money we require even though we can afford a mortgage - and I thought they had changed their requirements to check affordability more but obviously not!

Gem