Property Guide:Looking to Rent
Rent to Buy
There is more than one way to define what rent to buy means.
There are two possible solutions that the term ‘rent to buy' might describe:
1. There are some rent to buy schemes where you can choose a rent to buy property of your liking and approach an organisation or the landlord to buy the property and you lease it from them. You might take out something like an option to buy the property in the future at a price which is anchored – meaning the property doesn't get further out of reach financially. In a market of increasing property values, this is the main advantage of rent to buy schemes. You rent the property until you decide if and when you want to buy it. This is not only called rent to buy but also called a lease option. You will want to take mortgage advice for when you take out your rent to buy mortgage. Sometimes with rent to buy schemes you have choose a property from a particular portfolio. The Government has a similar scheme called Rent to HomeBuy. Under this scheme, first time buyers in England with a household income of £60,000 or less will be able to rent at 80% of the market rate in order to help save for a deposit. After two or three years, they would then have the option to buy 25% or more of the property. To find out if Rent to HomeBuy is operating in your area, contact your HomeBuy agent.
2. Shared Ownership is where an individual co-owns a property with another party – usually the local housing association and pays rent to the co-owner for the part of the property that they do not own. The co-owner does not occupy the other part of the property.
Over time, you might increase the proportion of the property you own thereby potentially coming to own the whole of the property yourself, no longer paying rent, just a mortgage.
You can find out all about shared ownership in our shared ownership section. You can also find rent to buy homes that are available for ‘rent to buy'. These rent to buy homes are typically but not always earmarked for key workers.
3. A new scheme allows you to rent a property with a view to buying, which is being sold by a buy-to-let investor. You make a legal commitment to buy the property at the same time as the landlord makes a similar commitment to sell it to you - at market price. Because you have made the commitment, you can rent while you are saving up the deposit. Once you are committed to buy, you must demonstrate to a mortgage company that you can cover the mortgage. This scheme relies on an insurance-based exchange bond which gives security for the landlord should the potential buyer not be able to secure a mortgage after all.
The government runs its own rent to buy or right to buy schemes as part of its social housing programme.
Useful websites:
www.communities.gov.uk .
Most useful and most popular pages on this site:
Look for your First Property l Seek First Time Buyer Mortgage Advice l See our Best First Mortgages Comparison Table l Find out about First Time Buyer Mortgages l Find out How to Buy a House l Learn all about The First Time Buyer Mortgage l Shared Ownership