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Right to Buy

If you go to a financial adviser or consultant to arrange your mortgage, they may encourage you to borrow more than the purchase price of the property in order to cover other things. These may include:

  • credit card debt 
  • rent arrears 
  • holidays 
  • new car 
  • home improvements. 

However, you may be surprised to know that Derby City Council has a say in how much you can or cannot borrow for up to five years after you have bought your home and what that borrowing can cover.

We have a legal interest in your property, regardless of whether it is a house/flat or maisonette, for up to five years after you have bought your home.

This is because we will have given you a discount off the open market valuation of the property under Right to Buy rules and, if the property is sold before the end of the five-year discount period, then all or part of the discount must be repaid and possibly part of any increased sale value.

This legal interest is known as a ‘charge’, and it means that if you default on your mortgage payments and your lender has to re-posses your home, Derby City Council will be repaid the discount before your lender recovers the value of the mortgage.

If you want to borrow more than the purchase price of your property your lender will probably ask us to agree to what is known as a ‘postponement of charge’. This postponement means that, if your home was repossessed, your lender would recoup all of the money borrowed from them, before the discount was repaid to Derby City Council. Mortgage lenders require this in case the sale price of your home is insufficient to cover the repayment of the discount as well as the loan.

The Housing Act 1985 sets out two situations where we must agree to postpone our charge, these are:

  • to enable the borrower to pay our service charges
  • to enable the borrower to make home improvements. 

There are no other situations where we would agree to postpone our charge.

 

We will only postpone our charge if your mortgage lender (your bank/building society) formally asks us to. They must put their request in writing to us, detailing what the additional loan is for.

You must also provide us with copies of the quotes and/or estimates you have received for the improvements you propose. We will only agree to a postponement to cover the exact amount of the quotes which you send in.

No, but the process is slightly different.

Before you purchase it is sufficient for our solicitors to issue a formal ‘Letter of Postponement’ to your lender, signed by one of our approved signatories. This then goes to the Land Registry when you are registered as the new owner. After completion we must issue a ‘Deed of Postponement’.

Department:

Housing Strategy and Research Team

Phone:

01332 640149

Minicom:

01332 640149

SignVideo:

Signing service

Address:

Derby City Council
Council House
Council House
Derby
DE1 2FS