One of the most appealing aspects of the Right to Buy scheme is that the substantial discount applied to the purchase price can significantly reduce or eliminate the need for a separate cash deposit. Whether you need to find additional funds on top of the mortgage depends on how much the property is worth, how large your discount is, and what a lender will offer you against the discounted price.

How the Discount Works as a Deposit

When a lender assesses your Right to Buy mortgage application, they will typically lend against the discounted purchase price rather than the open market value. The discount itself represents built-in equity in the property from day one: you are buying at below market value, which means the property is worth more than you are paying for it before you have contributed any savings.

Many Right to Buy mortgage lenders are willing to lend up to 100 percent of the discounted purchase price, meaning you do not need to find any additional cash deposit at all. Your loan-to-value ratio is calculated against the discounted price, and because the discounted price is already below the market value, the lender has an inherent safety margin in the security.

When You Might Need Additional Funds

In some cases you may need to contribute funds beyond the mortgage. If the discounted purchase price is higher than a particular lender is willing to lend you based on their affordability assessment, you would need to make up the difference from savings or other sources. This is not a deposit in the conventional sense but rather a gap between what the lender will offer and the purchase price.

You will also need to fund the legal costs of the purchase, which include your solicitor's conveyancing fees and disbursements such as local authority searches and Land Registry fees. These costs typically range from one thousand to two thousand pounds for a straightforward Right to Buy transaction and cannot be added to the mortgage in most cases.

Mortgage Availability for Right to Buy

Not all mortgage lenders offer Right to Buy products. Mainstream lenders that do not operate in this niche may not be familiar with the scheme's requirements or willing to lend on the specific terms involved. There are, however, a number of lenders who specifically offer Right to Buy mortgages and who are experienced in lending at high loan-to-value ratios against the discounted purchase price. A mortgage broker with experience in Right to Buy can identify the most suitable lenders and products for your circumstances.

Help from Family

If a funding gap does exist, family members who live in the property and qualify as joint purchasers can combine their income with yours for mortgage affordability purposes, which may increase the amount available to borrow. A family member who does not live in the property cannot be a joint purchaser for Right to Buy purposes, but may be able to act as a guarantor for the mortgage with some lenders.

Summary

In most Right to Buy cases, the discount on the purchase price acts as the deposit, and many specialist lenders will offer mortgages covering up to 100 percent of the discounted price. You will need to fund your legal costs separately. If the mortgage available does not cover the full discounted purchase price, a funding gap arises that must be covered from savings or other sources. Speaking to a Right to Buy mortgage specialist before making your application is the best way to understand your position.