Can I release equity from my Right to Buy house?

Could you be eligible for a Right to Buy equity release plan?

If you own an ex-council house property which you purchased through the Right to Buy scheme, you may be looking at ways to access some of the equity in it. One option for over-55s looking for a tax-free cash boost is equity release. Here, we explore if you can release equity from a Right to Buy house and if so, how to go about it.

In this article, we will be covering:

• What is equity release?
• What is a Right to Buy house?
• Can you do equity release on an ex-council house?
• Can I release equity from my Right to Buy house?
• How much could I release from my ex-council house?
• Equity release providers and Right to Buy schemes
• How could equity release benefit me?

We hope this guide will help you understand the issues around ex-council houses and equity release. Our selected advisers are also available to discuss your circumstances and offer further information and advice. Find out what’s possible for you: get a free quote or talk to one of our friendly consultants by calling 0800 096 2215 or request a call back.

Please note: This article is provided for information purposes only and does not represent financial, mortgage or investment advice. If in doubt, you should seek independent financial advice.

What is equity release?

Equity release is a way for homeowners to unlock some of the value from their homes without having to sell or make mandatory monthly loan repayments. There are two main types of equity release schemes: a lifetime mortgage and a home reversion plan.

Lifetime mortgage: The most popular type of equity release. With this type of plan you continue to own 100% of your home after releasing some of the money from it. You do not have to make any monthly repayments, instead the interest rolls up each month and is added to your total loan amount. The loan is repaid through the sale of your home when you pass away or move into long-term care.

Home reversion plans: These allow you to sell a percentage of your home to the provider, whilst continuing to live in your home as a tenant without paying rent. When you pass away or move into long-term care, your home will be sold and your percentage of the sale proceeds will be returned to you or your estate.

Would you like to know how much you could unlock from your Right to Buy home? Simply call us on 0800 096 2215 or request a call back for a time that suits you, and we’ll arrange an appointment. Alternatively, check your eligibility and get an initial indication of how much tax-free cash you could unlock.

What is a Right to Buy house?

Shortly after winning the election in 1979, the new Conservative government introduced the Housing Act 1980. This gave five million tenants of local authority houses in England and Wales the right to purchase their council homes at a discount. Scotland followed suit the same year with the Tenants’ Rights Act 1980. 

According to the House of Lords Library, over 300,000 properties sold in the first three financial years following the passing of these acts, with many more sold since. The Right to Buy scheme has successfully helped hundreds of thousands of people get onto the property ladder. 

For those thinking about purchasing their Right to Buy home, the scheme offers some benefits worth considering. Crucially, the scheme could enable you to get a foot on the property ladder at a significantly lower price. Once owned, your home will then be yours to improve and do with as you wish. You can also start benefiting from any future property price increases that might occur. 

Right to Buy discounts

According to the government’s Right to Buy scheme website, discounts of up to £87,200 are available. This amount goes up to £116,200 for homes in London due to the higher house prices there. If you decide to purchase your house through Right to Buy, the discount you might receive will depend on the following:

• How long you have been a tenant.
• Whether you are buying a house or a flat.
• How much your home is valued at.
• If you have used Right to Buy in the past.

Can you do equity release on an ex-council house?

Some lenders will arrange Right to Buy equity release plans for those who have purchased their home through the Right to Buy scheme. 

Here are some facts about Right to Buy equity release that you might find useful as part of your initial research:

• You may be able to get a Right to Buy equity loan whether you bought your home from the council, or from the original Right to Buy purchaser.
• Most lenders will not offer equity release if you bought your home in the last five years and were given a Right to Buy discount. If you are eligible for an equity release plan, you may have to pay back some or all of your discount if you arrange your plan within the five-year period. 
• Your chosen equity release provider may insist that you purchase the freehold if your property is a leasehold. You may be able to use some of the money you unlock with equity release to do this. 
• Equity release plans typically require a minimum property value of £70,000. But if your home is an ex-council or ex-housing association property, some providers require it to be worth a minimum of £100,000 in order to apply.

Can I release equity from my Right to Buy house?

The best way to find out if you are eligible for a plan is to speak to one of our selected advisers. They will be able to tell you if you can release equity from your home and how much you could unlock.

To be eligible for Right to Buy equity release, you and your home will need to meet the lender’s eligibility criteria. This varies from lender to lender, but typically covers these areas:

• Your age. The youngest applicant must be aged 55 or over.
• Value. You must own a home worth a minimum of £70,000 (£100,000 with some Right to Buy equity release providers).
• The type of property. Some lenders won’t offer equity release on flats. 
• Your property’s condition. Your home must be well maintained.
• Length of ownership. How long you have owned your Right to Buy home may also affect your eligibility for a plan.

Our selected advisers will be happy to gather the relevant information from you to find out if you qualify for a plan and how much you could unlock. Call our friendly team today on 0800 096 2215 or request a free callback here.

How much could I release from my ex-council house?

The amount you could unlock from your home depends on a number of factors including the value of your property. The higher the value, the more you can typically unlock. 

Even with the housing market currently seeing a fall in values, if you’ve owned your home for a few years then it may have grown significantly in value since you purchased it. This means the amount you could unlock may be more than you thought. 

According to the Nationwide House Price Index the average terraced house in the UK rose in value from £135,105 in 2012 to £230,770 in the third quarter of 2022. There’s even better news for owners of semi-detached homes as average values rose from £159,504 to £271,397 in the same period.

A quick way to find out how much your home is currently worth is to search property selling websites such as RightMove and Zoopla for similar properties in your area. 

There are a number of other factors that affect how much you could release, including:

• Your age. The older you are, the more you can release. There is a minimum age of 55.
• The type, location and condition of your property. A lifetime mortgage is repaid through the sale of the property, so lenders will consider factors that may affect its value and saleability. 
• Your health or lifestyle. Equity release is one of the few times where health issues can benefit you financially. With an enhanced lifetime mortgage, you may be able to release more cash or benefit from lower interest rates if you are living with certain health conditions or lifestyle factors.

Read more: How much equity can I release from my home?

Equity release providers and Right to Buy schemes

There are a number of equity release providers, each with their own criteria and requirements. You may find that one lender will accept you whilst another does not, so how do you compare quotes and find out who might offer you a plan? Our selected advisers are here to help and will happily run a search for the best provider and plan for your needs.

Here are some of the equity release providers who you might be able to arrange a plan with by coming through Equity Release Wise:

• Aviva considers properties that have been acquired under any Right to Buy scheme. That isn’t to say they accept all Right to Buy homes, but your adviser may be able to make an application depending on your circumstances.
  
• Just accept ex-local authority houses valued at £100,000 or more that are in a good state of repair. They will not accept Right to Buy properties if they are still within the pre-emption period – the first five years after you purchased your home under the scheme. Your property must be fully owned and occupied as your main residence. 
• Canada Life will consider your application on an individual basis if your home is an ex-council or housing association property on selected developments. They will not accept any properties that are still within the five year pre-emption period of a Right to Buy scheme. They will not approve equity release on an ex-council flat.
• Pure Retirement will consider ex-public sector houses and bungalows providing they are valued at £100,000 or more. If your property is leasehold, it must have a minimum of 120 years remaining on the lease. They will not approve equity release on ex-council flats.
• Crown Equity Release offers home reversion plans, which allow you to sell all or some of your home to a reversion company. If you have owned your home for less than ten years after using Right to Buy, the scheme’s rules state that you must first offer your home to your previous landlord or another social landlord in your area. You can sell your home to anyone if the landlord does not agree to buy it within eight weeks. 

How could equity release benefit me?

An equity release plan could be a huge help to someone who has bought through Right to Buy. Perhaps you are looking for a tax-free cash lump sum to spend on improving your property? Making home and garden improvements is one of the top reasons for equity release as it can significantly increase the value of your home. 

Alternatively, you might be looking for a cash boost to top up your day-to-day finances, or to help your loved ones complete the purchase of their own home. Whatever the reason, the money you unlock would be yours to spend however you wish.

Speak to a specialist today

If you decide to explore the option of unlocking some of the tax-free cash from your Right to Buy home, our selected advisers will be able to look into this for you. For peace of mind, all the information, quotes and initial advice you receive is free of charge. 

This means it needn’t cost a penny to find out if you are eligible and how much you could unlock. Only if you decide to go ahead with a plan will you be charged a fee for advice, which you can pay from the money you unlock.

If you’re a homeowner aged 55 or over, find out if you are eligible for a plan by calling 0800 096 2215 or request a call back here. Our friendly team will be able to answer your initial questions and put you through to one of our selected advisers to help you further.