Help To Buy UK government mortgage scheme

Rent to Buy

What is Rent to Buy? Read our guide to learn if Rent to Buy is right for you

Does the government’s scheme help you solve the riddle of whether to rent or buy? How can you find Rent to Buy homes?

We answer all your questions about rent to buy homes, including how it differs from ‘part rent part buy’ schemes, and whether they could be suitable for you.

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Rent to Buy homes

Rent to Buy is a government scheme designed to ease the transition from renting to buying by providing subsidised rent for a number of years in rent to buy homes.

After the time period has elapsed, rent to buy homes give you the option of buying the property outright or entering a part rent part buy shared ownership scheme (see ‘Part rent part buy – Shared ownership’ below).

If you choose not to purchase the property however, or are financially unable too, then you musty move out of the rented accommodation after five years.

The main attraction of Rent to Buy properties is the subsidised rent, providing new-build homes at typically four-fifths of their market value. The property remains at below-market rates for up to five years, although the exact timescales depend on the property.

The reason for this reduced rent is that you should be able to save up more money than you otherwise could to invest in buying the property at the end of the lease.

Typically a lease period will last anywhere from six months to 5 years, depending on the property in question, although you are free to make an outright offer, or look into a part rent part buy scheme, at any time during your lease.

Are rent to buy schemes right for you?

You may eligible for Rent to Buy properties if you earn under £60,000 a year as a household, whether it be one person or multiple.

You also have to be a first time buyer and have a reasonably good credit history. To learn more about credit history, checking your credit report, and how to repair damaged credit take a look at our dedicated guide.

There are also more precise criteria but these vary by local authority. You may for instance find that those currently in council housing are given priority.

However, more importantly you should decide whether the properties are suitable for you.

Even though you may be eligible that doesn’t mean you will find the right home, and there’s no point having subsidised rent if you don’t want to live there.

What is more, even if you find a property that is suitable you have to look at the details.

If the term is a short one – say six months – then you are essentially looking at a short tenancy and need to be fairly confident that you can save enough to make the purchase at the end of the lease.

Alternatively, if you have a long lease – say five years – you have far more time to save properly, but you also run the risk of house prices escalating to the point where you can no longer afford your property.

You should also have your home independently assessed. Get a mortgage advisor to value the property and make sure you can still get a mortgage for a home under the Rent to Buy scheme.

Rent to buy

Finding rent to buy homes

Unfortunately finding rent to buy homes is incredibly difficult and varies hugely depending on what area you are looking in.

There are a number of different names that are used for the Rent to Buy scheme depending on where you live. Look out for: ‘Try before you buy’, ‘Rent save buy’, ‘Rent to own’, and ‘Intermediate market rent’.

Your first step to finding a rent to buy property is to register with one of the help to buy agents listed on the helptobuy.org.uk site. Then you can start searching for homes and seeing what is available.

Part rent part buy – Shared ownership

Not convinced by rent to buy? No problem, there are alternative home buying support schemes like part rent part buy.

Part rent part buy is available on a range of properties, including some of those covered under Rent to Buy.

Part rent part buy, as the name suggests, is a scheme that divides the cost of buying a property, making it more affordable to get a foothold on the housing ladder.

Shared ownership, as it is also known, lets you buy a portion of your home – anywhere from 25% to 75% depending on what you can afford – and rent the rest from a housing association.

As well as making your home more affordable by reducing the amount you have to borrow up front, rent to buy schemes also promise you a below-market rental cost for the remainder of your property.

Another great thing about part rent part buy is that most homes allow you, over time, to purchase a greater percentage of your property. This gradual increase in ownership is known as ‘staircasing’.

Most of the homes available under shared ownership schemes are owned by housing associations, and when you sell shared ownership homes the housing association has the right to buy it back.

You will also need to make your mortgage provider aware that you are looking for a mortgage on a shared ownership property.

Problems with shared ownership

While shared ownership may sound like a great way for first-time buyers to get on the housing ladder there are problems.

If you fall behind on your rent for example you could be evicted from the property and lose your deposit, making them a dangerous proposition for those who may not be in permanent employment.

You can also run into trouble when it comes to resale, as demand for secondhand shared ownership isn’t great.

What’s more, you are at the whim of the housing association when it comes to rent price increases and you are entirely responsible for maintenance costs.

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