Mortgage info please regarding discounted HA house

[NickNacks]

So we've had a very generous offer from our Housing association to purchase our house with a £75,000 discount.

The property is worth c. £300,000 so obviously we would only need a mortgage for the remaining £225,000.

Now I know nothing about house buying so feel free to speak to me like a child! :)

Would we still need a 100% mortgage? I think no as the house is worth more than we are borrowing but BIL days yes because it's 100% of our purchase price.

Which leads me to my next question.... Does the discount get given to us similar to a deposit and therefore we won't need a deposit or is it just a lower asking price and so we will still need a sizeable deposit?

Thank you for any advice or info you can give me! :)

The mortgage provider should regard the £75k as a deposit, so it wouldn't be seen as 100%. The discount is just taken off the price you need to pay the HA (lower asking price). I don't think you'd need a deposit as the discount already counts as one, though banks might still prefer you to have an additional deposit in cash to show you have been able to save.

Haven't had experience with this with HAs, but have known friends/family who have bought council homes and the discount has always counted as the deposit. Haven't known anyone to buy without some kind of cash savings as well though (but this larger discount is quite a new thing - discounts were capped at £16k before).

You might run into some problems with mortgage firms as they can be a bit negative about social housing, esp. if the estate is still mostly rented or in a high rise. But that will just mean more shopping around, if your credit history is otherwise fine it should be ok.

What normally happens is the landlord gets an open market valuation (300k) and then provides the discount(75k) and you find the rest so you will need to find 225k and you can get a mortgage for all of it or pay from a mix of some savings (deposit) and mortgage.

If you get a mortgage for the full amount of 225k, it works out at a loan to value (LTV) ratio of 75% (225/300 x 100%). So you are correct, it's not a 100% mortgage as the house is worth more.

Your HA should talk you through what the offer entails and how it works and timescales and what you need to be aware of.

I'm guessing as the discount is 75k you are a former council tenant (did your house transfer from a local authority to the HA?) and so you have what is called preserved right to buy on your tenancy so you are being offered the new higher right to buy discount launched by the govt in April.

As eagle says it can be difficult to get a mortgage in some cases, but your HA may be able to advise on companies to approach.

Hope that helps

Both very helpful thank you :)

I'm going to show DH your answers and I might be back with more questions. It's still a large mortgage for us to get so I'm not sure if we can do this but it's def worth looking into and we live in such an expensive county it might be out only chance of getting on the property ladder.

My DH who used to work for a mortgage company. Says your BIL is right you will need a 100% mortgage.

That's interesting HalleLouja. Can he explain why? As I said above, I know absolutely nothing about buying houses and my basic understanding is that a 100% mortgage means the loan is borrowed against 100% of the value of the house. Since we will only be borrowing 75% of the value we effectively are being gifted the 25% equity. Please could you explain the need for a 100% mortgage? Thanks. :)

Because you are not actually putting down a deposit. The mortgage company will look at the price you are paying for the house and the money you are putting down when it comes to sorting our your mortgage.

That's helpful thank you.