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Rent to Buy | Complete Guide

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From the basics to the rules, we delve into the ins and outs of the rent to buy scheme. It’s a popular choice among many homeowners, and aims to make the transition from renting to buying smoother. 

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.

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 length varies depending on the property itself.

At the end of this period, you have the option to buy the property, or buy a share of it, using the Shared Ownership scheme. Alternatively, you can move out.

Rent to buy is one example of how the government can help you buy a home and make it that little bit easier to get on the property ladder. 

A closer look at the rent to buy 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 it all mean for you?

The rent to buy 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

Do you need good credit for rent to buy?

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. 

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What if you don’t qualify for rent to buy? 

If you find you’re not eligible for rent to buy, there are a number of other options available to you from the government. 

There are the affordable home ownership schemes, including loans to help with the cost of a new build, right to buy and shared ownership. These schemes have 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’. 

What does London Living Rent mean?

London Living Rent is essentially the same thing as rent to buy. Under the London Living Rent program, eligible households can also apply for a rental property at a discounted rate  set at one third of the average household income in the local area. 

For instance, if the average household income in an area is £60,000 per year, the London Living Rent for a property in that area would be set at £20,000 per year. To be eligible for the London Living Rent program, households must meet certain criteria, including having an income that is less than 80% of the local median income, not owning any other property and not receiving housing benefit.

Is London rent expensive?

Rental prices in London are considered expensive, especially compared to other parts of the UK. Several factors contribute to the high cost of rent in London, including increased demand for housing, a limited supply of rental properties and the high cost of living in the city. This is one reason why the London Living Rent program helps. 

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. 

Am I eligible for rent to buy?

There are a number of factors you need to consider when deciding if rent to buy is the right option for you or if you’re eligible. 

Reduced rent

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, 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.

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.

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Social landlord

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. This isn’t for everyone, however, 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 assesses if you’re eligible. If you’re on their database, you should be notified as soon as a property becomes available. 

Other ways to buy a home instead of using rent to buy

Rent to buy isn’t the only option available when it comes to getting help to purchase a home. Other options include:

Traditional mortgage

This is the most common way to buy a home. You’ll need to save a deposit, usually around 5-20% of the property’s value, and then take out a mortgage for the remaining amount. 

Shared ownership

The Shared Ownership scheme that allows you to buy a share of a property and pay rent on the remaining share. It’s intended for people who can’t afford to buy a property outright and is often used by first-time buyers.

Government schemes

There are several government schemes available in the UK to help people buy a home, including the right-to-buy scheme, which allows council and housing association tenants to buy their home at a discounted price, and the new-build scheme, where you buy a new-build property with a lower deposit.

Joint ownership 

If you can’t afford to buy a property on your own, it might be worth considering buying with a friend or family member. This can allow you to split the cost of the property and the mortgage payments.

Should I rent to buy?

Whether you decide to rent or buy essentially comes down to your individual circumstances. For many, the idea of renting is better as it gives them more freedom and flexibility without making a significant financial commitment. 

Yet, buying a home in the UK is still the dream for a lot of people, and schemes like rent to buy can help you realise your ambitions of getting on the property ladder. 

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? Our recommended mortgage advisers have a 5-star Trustpilot rating from over 5,000 reviews. Get a competitive mortgage quote below.

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Last Updated: December 21st, 2022