So, what is Rent to Buy?
The housing scheme gives you the option to rent a newly built home for a period of time. You can then buy the property, or a share of it, at the end of your rental period.
Making the transition from renting to buying smoother, this is popular among hopeful homeowners.
From the basics to the rules, we delve into the ins and outs of the scheme.
How does Rent to Buy work?
You rent a new build home at more affordable rates (20% below the market rate) for up to five years. The exact period varies depending on the property itself.
At the end of this, you then have the option to buy the property, or buy a share of it, using the Shared Ownership scheme. Alternatively, you can move out.
This is one example of how the government can help you buy a home.
A closer look at the scheme
Homes are made available to rent through a shorthold tenancy, anywhere from six months to five years.
At any time during your lease, you’re free to make an offer to purchase the property outright, or look at part-rent part-buy options.
The availability of this scheme depends on the local authorities themselves.
What does this mean for you?
The scheme allows you to live in the property at a reduced rate of 80% of market rents. This can help give you the opportunity to save for a deposit more easily.
The intention is that the scheme makes it more likely you’ll be able to afford to buy the property, thanks to the subsidised rent.
Who is the Rent to Buy scheme available to?
Contrary to what some believe, the scheme isn’t only available to first time buyers.
You’re eligible if:
- Your household earns less than £60,000 a year (whether this is just you, a family, or partners)
- You’ve owned a home before but are now struggling to get back on the property ladder
- You require help as a first time buyer
Are there any other requirements?
Usually, a good credit history is a necessity if you want to rent a home through this government scheme. So, always check your credit score to see where you stand.
Specific requirements vary depending on the property itself. Priority is often given to social housing tenants or council tenants, or first time buyers.
You can check whether you’re eligible with your local Help to Buy agent.
What if you don’t qualify?
If you find you’re not eligible for Rent to Buy, there are a number of other options available to you.
This includes the Help to Buy equity loan, which is where the government lends you up to 20% of the cost of a new build home. This has helped many homeowners get on the housing ladder.
It’s all in the name
There are slight variations of the scheme, both in name and rules. Therefore, depending on where you live, it might be called something different.
For example, there’s ‘London Living Rent’ for those in the capital, or ‘Rent to Own’.
How do Rent to Own homes work?
In Wales, the scheme has a different name and works a little differently too.
Rent to Own allows you to live in a property at market rent for up to five years. After two years, you can apply to buy your home.
After that, you’ll receive 25% of the rent you have paid back, plus 50% of any property value increase. The aim is that you can use this to put towards a deposit.
Is the scheme right for you?
There are a number of factors you need to consider when deciding if this is the right option for you.
Are you struggling to save for a deposit and be taken seriously by mortgage lenders?
Unsurprisingly, many hopeful homeowners are tempted by the idea of reduced rate rent. This gives you a much better chance of saving.
However, it’s important to remember this isn’t your only option for getting your foot on the property ladder.
Also, it’s important to remember the scheme won’t do the saving for you. You’ll still need to be savvy with your money, doing what’s necessary to save. Switching energy suppliers is often a good idea, helping to put more money in your pocket each month.
Access to properties
Are you currently unable to afford somewhere you’d like to live?
The scheme can also help give you access to properties you may have previously not been able to afford.
You’ll be able to rent the home first, giving you an idea of whether you like living in the area and if it’s right for you. There’s no commitment to buy immediately, you have the time to make up your mind.
Want to get a feel for an area before you rent? A property report can collect all the information you need to know, everything from local schools to amenities. Get one for yourself to gain a better understanding of where you’re going to live.
Remember, when it comes to the Rent to Buy scheme, you’ll be renting from a social landlord.
For some, this appeals, as it provides them with extra security. However, this isn’t for everyone, so you need to decide what it is you’re looking for.
Apply to Rent to Buy
Decided the scheme is right for you? The first step is to register with your local Help to Buy agent, who assess if you’re eligible. If you’re on their database, you should be notified as soon as a property becomes available.
Speak to a mortgage adviser
If you’re planning on buying the property after renting it, it’s advisable to speak to an independent mortgage adviser to understand your options.
Need help finding one? Get a competitive mortgage quote below.