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Is Right to Buy right for you?

A quick guide to the costs and legal responsibilities of buying and owning your home

Becoming a homeowner is usually the biggest financial decision people make in their life. The discount available under the Right to Buy means that lots of tenants are thinking about buying their home. 

But it's important you consider the financial implications and other responsibilities you would have as a homeowner before you decide if buying your home is the right choice for you.

One-off costs include things like:

Valuation and mortgage fees

We won’t charge you when we carry out the valuation of your property, but if you are buying it with a mortgage, the mortgage provider will probably want to carry out its own valuation and will charge you a fee for this. There is also usually an administration or arrangement fee to pay when you apply for a mortgage.

Survey costs

We don't carry out a structural survey when you apply to buy your home, but we strongly recommend that you consider getting a survey done yourself by a qualified surveyor. There are various types of survey available and the price you will have to pay depends on how detailed the survey is.

Stamp duty

This is a tax payable to the government when you buy a property and is based on its value. Your solicitor or financial adviser will be able to tell you how much stamp duty you need to pay. There is more information at www.gov.uk/stamp-duty-land-tax-rates.

Legal costs and land registry fees

You will have to pay your solicitor's or licensed conveyancer's fees as well as any costs they incur on your behalf in connection with buying your home. You may also need to pay your mortgage provider's legal costs.

You will also need to pay a fee to the Land Registry to register your ownership of your home once you've bought it. Your solicitor will usually arrange this for you.

Ongoing costs of being a homeowner include:

Mortgage repayments

Mortgage interest rates are currently at low levels, but rates can go up or down. Most commentators expect interest rates to rise in the future. 

You should carefully think about what the impact might be if your repayments increase if interest rates go up, or when you come to the end of a fixed interest rate period on your mortgage. Higher repayments could reduce the amount you have available for paying for other financial commitments or bills.

The effect of any interest rate increase will probably be greater if your household income hasn’t gone up.

If you do not make payments as required by the mortgage provider, they can take legal action against you which could mean you lose your home.

Buildings and other insurance

Your home needs to be insured to cover the full cost of rebuilding it if it's damaged or destroyed by fire, storm, flood, or another type of incident. If your home is a flat or maisonette, we will arrange buildings insurance cover and you will be charged through your annual service charge. You cannot opt out of buildings insurance.

An 'excess' applies to the buildings insurance. This is the amount towards the cost of a claim you have to pay yourself.

You are responsible for arranging your own contents insurance to protect your belongings from theft or other risks.

You should also consider life insurance which would pay off your mortgage if you die, or mortgage repayment protection or critical illness insurance, which would cover paying your mortgage if you lost your job, or were unable to work through illness.

You should take your own professional advice on whether these or other types of insurance are appropriate for you.

Water rates, utility bills and council tax

As a tenant, we collect your water rates alongside your rent. If you buy your home, you will have to pay the water company direct. You will also have to continue to pay your gas, electricity and council tax.

Repairs and maintenance

You will be responsible for repairing and decorating the inside of your home. Repairs and improvements that the council might have done for you while you were a tenant, such as an annual servicing of an individual gas boiler, or rewiring, or upgrading the kitchen units , will be your responsibility.

Annual service charges

If you live in a flat or maisonette, you will have to pay a service charge for the services and repairs to your building and/or the estate that we will continue to provide to you. These services are not covered by your council tax, and you cannot opt out of paying the service charge.

The service charge includes day to services such as caretaking, grounds maintenance, block lighting and routine communal repairs and maintenance.

If your home is served by a communal heating and /or hot water system, you will pay for this through your service charge. You will not be able to opt out or be disconnected from a communal system. 

Day to day service charges can vary according to the type of property you live in and the number of services provided. Costs can vary from year to year, particularly for communal repairs. 

Major works charges

Living in a flat or maisonette means that major repairs or renewals to the building and/or estate may happen periodically. Things like lifts, roof coverings, electrical wiring and window frames have a lifespan and external decorations are carried out at regular intervals. These works are unavoidable and can be expensive.

In 2014/15 the average major repair service charge in Islington was £2,500.00, but the highest charge billed was around £12,000.00.

Estimates of both day to day and major works service charges will be given to you in your Landlord’s Offer Notice when you are given the valuation and purchase price of your home. You should look at these carefully and consider if you will be able to afford your contribution.

Buying a house

If your home is a house that is on a council estate, rather than flat or maisonette, in most cases you will be sold the freehold rather than buying a lease. As a freeholder you would be responsible for maintaining and repairing the inside and the exterior of the building as well as the garden and any boundary fences. You will be responsible for insuring the building and the contents.

You will also have to pay a service charge for the upkeep of the estate, including estate lighting and grounds maintenance. If your home is connected to a communal
heating/hot water system, you will have to pay a service charge for this service, and you will not be able to disconnect your home from the service.

New Generation Scheme

Once you have bought your home you should be aware that your children will no longer be eligible for the council’s New Generation Scheme; under the scheme
the children of tenants are given additional priority for housing, as the children of leaseholders your children will not be prioritised. Read more about the scheme.

Help and advice

If you want any advice or help on the implications of being a homeowner, you can contact Home Ownership services. We can also arrange to meet with you face to
face at our offices. Call 020 7527 7705 / 7709 / 7809 / 7813 or email homeownership@islington.gov.uk.

You can also get free and impartial advice on the financial aspects of buying your home from the Money Advice Service website or by calling 0300 500 5000.

You can get free advice on what it means to be a leaseholder by contacting the Leasehold Advisory Service, a government-funded body (or 0207 383 9800).

There is a lot of information on the government’s dedicated Right to Buy website to help you make an informed decision on whether buying your home is the right
decision for you. 

They have also set up a free Right to Buy Agent service to provide impartial advice. You can contact them through the Right to Buy website, or by calling 0300 123 0913.

Visit Fit Money for helpful information on budgeting and managing your money, including a budget calculator and information sheets.

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