Do I Need a Deposit to Buy My Council House

Buying your council house through the Right to Buy scheme can be a valuable way to get on the property ladder at a reduced price. One of the key concerns for many tenants considering this route is whether they will need a deposit in the same way as other property purchases. The good news is that in many cases, you may not need to put down a deposit at all, depending on the discount you receive and your mortgage lender's requirements.

Understanding how the scheme works, how discounts apply, and what lenders look for will help you plan your finances with confidence.

How the Right to Buy Scheme Works

The Right to Buy scheme allows eligible council tenants in England to purchase their home at a significant discount based on the number of years they have lived in the property. The longer the tenancy, the larger the discount, up to a maximum of £96,000, or £127,900 in London. This discount can often act as your deposit when applying for a mortgage.

For example, if the market value of your home is £200,000 and you qualify for a £70,000 discount, you may only need to borrow £130,000 from a mortgage lender. Some lenders view the discount as equity in the property and will accept it in place of a traditional cash deposit.

When You Might Still Need a Deposit

Although the discount can often replace the need for a deposit, not all mortgage lenders will agree to this. Some may still ask for a small deposit of five to ten percent of the discounted purchase price, particularly if they consider the borrower to be higher risk due to income, credit history or the type of property.

Additionally, if you are self-employed, on a low income or applying for a mortgage without another applicant, you may be required to provide a cash deposit to secure a competitive rate. It is important to shop around and speak with mortgage advisors who specialise in Right to Buy purchases, as they can help you find lenders that accept the discount as a full or partial deposit.

How to Pay if You Don’t Have a Deposit

If your lender does require a deposit and you do not have savings, you might be able to use a gifted deposit from a family member, provided this is declared and accepted by the mortgage provider. Some tenants consider using personal loans to raise a deposit, but this can affect affordability assessments and may reduce the amount you are able to borrow. Not all lenders will accept this method.

Another option is to wait until you have saved enough or to use government savings schemes like the Lifetime ISA, though this depends on eligibility and timeframes.

Legal and Practical Considerations

Buying your council house without a deposit is possible, but you will still need to cover other purchase costs, such as solicitors’ fees, mortgage arrangement fees and surveys. These are not covered by the Right to Buy discount and must be factored into your budget.

If you sell the property within five years, you may be required to pay back some or all of the discount. You may also be subject to restrictions on who you can sell to within the first ten years.

Conclusion

In many cases, you do not need a traditional deposit to buy your council house under the Right to Buy scheme, as the discount can act as equity towards your mortgage. However, this depends on the lender, your financial circumstances and the value of your discount. Always seek advice from a qualified mortgage broker or financial advisor to explore your options, compare deals and avoid unnecessary costs or delays.