Rent to Buy

The average monthly rent in England is now £1,369 a month, making it difficult for many prospective homeowners - particularly first-time buyers - to save a deposit alongside their typical monthly bills.

The Rent to Buy scheme could help make the transition from tenant to homeowner easier by offering a discounted rent on specific properties. This discount can then be used as a deposit to buy your rented home.

What is Rent to Buy?

The Rent to Buy scheme is designed to help tenants in England (there is a separate London Living Rent scheme for those living in London) save for a deposit to buy a home.

The properties are normally offered at 20% below market rent prices, meaning the 20% you would have spent on rent can be put to good use as deposit savings. 

The scheme is offered through housing associations, so you may hear it referred to under a number of names such as Rent to Save, rent to own homes, Intermediate Rentsave or 'try before you buy'. While most eligibility criteria are the same, individual housing associations may also include their own additional criteria.

There are also similar schemes around the UK that work slightly differently:

• The Rent to own Wales scheme is now closed to new landlords, but there may be some properties still available for tenants. It operates slightly differently as your rent isn't subsidised but you get a 25% rebate of all rent you’ve paid and 50% of any increase in value of your home since you began renting to help you buy.

• Rent to Own in Northern Ireland works in a similar way to the English scheme, though the Co-Ownership organisation is no longer taking applications.

• There is currently no comparable rent to buy scheme in Scotland, though there are other affordable housing initiatives available such as the Open Market Shared Equity Scheme.

How does Rent to Buy work?

The Rent to Buy scheme in England (outside of London) works in the following way:

• Rent to Buy properties are new build homes usually set at 80% of the local market rent

• You get first option to buy the home when it becomes available to purchase - usually after two years of renting

• The maximum tenancy is five years, at which point you will have to move out if you decide not to buy

• You may have the option to purchase your home on a shared ownership basis if you can’t afford the deposit or mortgage loan to buy the entire property

Can I get a Rent to Buy property?

If you meet the eligibility requirements for the scheme in your area, you'll be able to rent a home and begin saving a deposit. You will have the first option to buy if the landlord decides to sell whilst you’re a tenant. However, the property's market value at the time of sale may be higher than it was when you moved in. It could also be less, however, in which case you would also benefit from that saving.

Keep in mind that you'll also need to qualify for a mortgage to purchase the property once you've saved a deposit. Don’t forget to compare mortgages to see whether you could afford the loan size needed to get a Rent to Buy mortgage.

How much can I save with Rent to Buy?

Rent to Buy properties typically cost around 80% of the current market rent price for an equivalent home. The following example shows how much you could save on an average-priced home:

Market rental: £1,000 a month

Rent to buy rent: £800 a month

Saving: £200 per month

Total saved after five years: £12,000 + any interest on the savings to be used as a mortgage deposit

Buying the home through shared ownership

It may also be possible to buy a Rent to Buy home through the shared ownership scheme with some housing associations, if you're unable to qualify for a mortgage deal to cover the full cost of the property. This depends on the rules of the specific housing association that you are renting from, though most tend to allow it.

You will need to meet the eligibility criteria of the shared ownership scheme as well, to use this alongside the Rent to Buy scheme. This example shows how they can be paired to help you buy a home more easily:

Who is eligible for Rent to Buy?

The following eligibility criteria apply to all versions of the scheme, regardless of the name or housing association:

Each individual housing association may add additional criteria - for example, you may need local links to the area of the rental property 

How to find Rent to Buy properties

Some local councils, housing associations and other not-for-profit housing developers advertise Rent to Buy homes. It's not possible to use Rent to Buy with a private landlord.

Your initial tenancy agreement will be for up to 2 years. After that, if you need more time to save for a deposit, your landlord may agree to extend your tenancy. If you do not pay your rent on time and follow the terms of your tenancy agreement, you may not be allowed to stay in the scheme.

In Wales you can find an official list of Rent to Own landlords with properties available under the scheme.

In Northern Ireland, the Co-Ownership site will help you to locate rent to own properties, though they are no longer taking applications for Rent to Own.

What costs are involved with Rent to Buy?

When you join the scheme, the costs are similar to renting a home from a private landlord:

• A deposit, which will be held in a suitable Tenancy Deposit Scheme

• A fee to reserve your property in some cases - although this is usually deducted from your first month’s rent

• Your rent will increase annually by a maximum of 1% + the Consumer Price Index (CPI)

When you purchase your Rent to Buy home, you'll also need to consider the typical costs associated with taking out a mortgage, such as:

• Conveyancing and legal fees

• Valuation fees

• Mortgage application fees

• Stamp duty - depending on the cost of the home and whether you're first-time buyer (or not). Use our stamp duty calculator to find out how much you might need to pay.