If you’re on benefits and have dreams of owning your very own council house, you may wonder if it’s even a possibility. Being on benefits means less access to credit for many people, but does that really come into play when applying for funds to buy a council house?
The short answer to the question is “yes, you can buy a council house while on benefits!” In most instances, your benefit will be added as a form of supplementary income when the mortgage company carries out the required affordability assessment. Of course, you will need to prove in most instances that benefits are not your sole income stream.
Which Benefits Allow You to Buy a House?
You may be able to buy a council house while on any of the following benefits.
- Working tax credit
- Widow’s pension
- Severe disability allowance
- Maternity allowance
- Industrial injuries
- Disability living allowance
- Child benefit
- Carer’s allowance
- Attendance allowance
What’s the Catch?
One clincher is that you will no longer be allowed to claim housing benefits when you buy a house while on benefits – you certainly won’t be able to use a housing benefit to pay for mortgage costs.
Keep in mind that you’re only eligible for housing benefits if you have savings of less than £16,000. If you have savings greater than that and are claiming housing benefits and applying for a mortgage while on benefits, you may find that your local council takes a closer look at your situation, and you may find yourself in a spot of trouble!
Need more help? Check our quick help guides:
- Reasons why a mortgage could be declined on affordability.
- How reliable is a mortgage in principle?
- How do joint mortgages work?
- Can you get a mortgage on a fixed-term contract?
Can I Get a Mortgage if My Only Form of Income is Benefits?
Most mortgage companies will require you to have additional income streams in addition to your benefits. That said, if your benefits are your sole income stream, there are still options available for you to get a mortgage and acquire housing cost payments.
Government Schemes That Will Help You Buy a Council House on Benefits
If you’re looking into government schemes that do more than pay off the interest element of your home loan, you’re in luck. Several government schemes will assist you with purchasing a council home on benefits.
Right to Buy Scheme
This Scheme is aimed at individuals already living in a council house. It aims to help tenants purchase their homes at a considerable discount. It is said that this Scheme will also become available to housing association tenants in the near future. The discount amount fluctuates depending on the location of your home.
You have a right to buy if the council house is your only home and is self-contained. However, you also need to be a secure tenant.
In 2019 the maximum discount was set at £82,800 in England, with a slightly elevated discount allowed in London of £110,500. That said, discounts may increase annually, so it’s best to check with your council. Factors that influence the discount offered would include your tenancy term and, of course, the property’s value is placed on the market.
If you have been a tenant for 3 – 5 years, you can expect a discount of around 50% with an increase of 2% per additional year of tenancy, capped at a max of 70% discount.
- Mortgage 5 times salary.
- Can you get a mortgage on land?
- Refurbishment mortgages.
- Part and part mortgages.
- HMO mortgages.
Preserved Right to Buy Scheme
In instances where the council-owned your home but sold it to another landlord while you were an occupant, you could be eligible for Preserved Right to Buy. The Preserved Right to Buy is a legal right extended to former local authority tenants, provided they were secure tenants.
Preserved Right to Buy works very similarly to the Right to Buy Scheme, where discounts range from £84,600 across England to £112,800 in London.
The best way to find out if you’re eligible for the Preserved Right to Buy scheme is to check with your current landlord. If you’re not eligible, there is an additional scheme that may assist you – this is called the Right to Acquire Scheme.
You could be eligible if you were a secure council tenant and living in your home when it was transferred from the council to another landlord, like a housing association.
You could also be eligible if you then moved to another home owned by the new landlord. But not if you moved to a home owned by a different landlord.
Your landlord will be able to tell you whether you have the Preserved Right to Buy. If you’re a housing association tenant and you’re not eligible for this Scheme, you may be eligible for the Right to Acquire Scheme instead.
The Right to Acquire Scheme is aimed at tenants of housing association homes with a public sector landlord for no less than three years. You can then buy your home at a discount of £9,000 – £16,000, depending on the home’s location and value.
- When was my house built?
- Buying out a sibling from an inherited house
- How long does it take to release mortgage funds?
- Does a valuation mean that a mortgage is approved?
- Mortgage lenders that accept benefits
- Can I extend my interest-only mortgage term?
Buy a Council House While on Benefits Final Thoughts
As you can see, there are several avenues you can take when wanting to buy a council house on benefits. Chat with your mortgage broker and your landlord to determine which option is best suited to your needs and financial situation.
Call us today on 01925 906 210 or contact us. One of our advisors can talk through all of your options with you.