Property Buying Guide

Lease Option

It's not just social housing tenants who can access right to buy – you can too, by taking out a lease option on a property of your choice. In some schemes you don't even have to take out a lease option - schemes vary.

Based on a US model, a lease option, option to buy or rent to buy scheme could provide the perfect hybrid between renting and buying your first home.

The companies offering this service allow you to either choose your own property or choose one from a portfolio of theirs - it depends on what sort of lease option scheme or right to buy scheme they are offering. You can rent the property from them – typically a new-build flat – and have the right to buy the property yourself within a three-year period. With some schemes you don't even need to pay for the option. To be considered you will need to know how much you can borrow, so take mortgage advice at the outset.

The main advantage of rent to buy is rather than playing a game of ‘savings catch-up' whereby you can't save as fast as house prices rise, the price of the property will be fixed from the day you move in as a tenant. And, as the property will be yours one day, any time effort and money you put into its décor will not be wasted.

Of course this opportunity will cost you somewhere along the line. If you sign the tenancy agreement there may be an ‘option fee' of around two per cent of the current property value. However, this may be lower than the market value as they buy properties in bulk. This option fee secures your ‘irrevocable right to buy' within the three years but it doesn't tie you into doing so. If you don't, it is possible to re-enter into the three-year agreement. Details may change depending on which of the rent to buy schemes or lease to buy schemes you are researching.

Before you can embark on lease option of rent to buy you will need to establish what sort of rent to buy mortgage you could afford, so speak with a mortgage advisor at the outset.

The rent you pay while waiting to buy may also be priced at a premium of around 10 per cent. However, if you have not managed to save for a deposit by this time, you should have one by default. This is because the mortgage you need to buy the property should be considerably less than its value – providing of course that property prices have continued to rise.

Companies operating in this field will need to know how much you will be able to afford when you come to buy the property/exercise your option so it's worth contacting a mortgage advisor about a rent to buy mortgage before you discuss your property needs with them.

• Buy a new-build property for a refundable £2500
• Request advice about your rent to buy mortgage
• See our table of best first mortgage comparisons for first time buyers
• Look for your first  property for sale in your area