Rent to Buy

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.

What is Rent to Buy?

The Rent to Buy scheme in the UK (sometimes called rent to save or Rent to Own in Wales) is a government initiative designed to ease the transition from renting to buying, by providing subsidised rent for a number of years in rent to buy homes. In London, the scheme is called London Living Rent and operates in the same way as Rent to Buy.

Under the Rent to Buy scheme in England, Scotland and Northern Ireland, new homes are available to rent at 20% below the market rate for a specified time period. 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 must move out of the rented accommodation after five years.

How does Rent to Buy work?

The main attraction of the Rent to Buy scheme is the subsidised rent, providing newly-built homes at typically four-fifths of their market value. The property remains at below-market rates for up to five years, although the exact time scales depend on the property.

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

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

Who is eligible for Rent to Buy houses?

You may be 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.

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, so check with your local authority for the specific details.

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

Is the Rent to Buy scheme right 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 Rent to Buy 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.

Finding Rent to Buy houses

Unfortunately finding rent to buy properties 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 rent to buy houses is to register with one of the help to buy agents listed on the helptobuy.org.uk site. Then you can start searching for rent to buy properties and seeing what is available.

Part-Rent Part-Buy – Shared ownership

If Rent to Buy isn’t suitable for you or you fall outside of the eligibility criteria, there are alternative home buying support schemes like part rent part buy, or shared ownership.

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.

For a rent to buy mortgage you will also need to make your mortgage provider aware that you're 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 can be problems that arise. 

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, with limited demand for second-hand shared ownership depending on your area.

Are there any other home ownership schemes?

The government has several home ownership schemes designed to help people to buy their first home. The two main schemes are the Help to Buy shared ownership scheme, and the Help to Buy equity loan. You can find out more about help to buy here.

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