Rent to Buy: A Guide for Prospective Homeowners
Rent to Buy is a scheme that allows you to rent a new build property at a lower rate than the market value, while saving up for a deposit to buy it in the future. It is available in England, except for London, where a similar scheme called London Living Rent operates. Rent to Buy can help you get on the property ladder without having to pay a large upfront deposit or take out a mortgage.
How does Rent to Buy work?
Rent to Buy works by offering you a discounted rent, usually 20% below the market rate, for a minimum of five years. During this time, you can save up for a deposit and have the option to buy your home through Shared Ownership, which means you only buy a share of the property and pay rent on the rest. Alternatively, you can buy your home outright if you can afford it.
Who is eligible for Rent to Buy?
To be eligible for Rent to Buy, you must be a working household and intend to buy your own home in the future. You must also be a first-time buyer or returning to the market after a relationship breakdown. You will need to complete a pre-qualification form and meet the criteria set by the housing provider. You will also need to pass an affordability assessment and a credit check.
What are the benefits of Rent to Buy?
Rent to Buy has several benefits for prospective homeowners, such as:
- You can live in a high-quality, new build home at a lower rent than the market value.
- You can save money every month towards a deposit and build up your credit history.
- You have the option to buy your home through Shared Ownership or outright after five years.
- You have security of tenure and can enjoy living in your home without worrying about moving.
What are the drawbacks of Rent to Buy?
Rent to Buy also has some drawbacks that you should be aware of, such as:
- You will not own any equity in your home until you buy it.
- You will have to pay rent and service charges on top of your mortgage if you buy through Shared Ownership.
- You may not be able to buy your home if your circumstances change or the property value increases significantly.
- You may have limited choice of properties and locations depending on the availability of the scheme.
How to apply for Rent to Buy?
To apply for Rent to Buy, you will need to find a housing provider that offers the scheme in your area. You can search for properties on websites such as Help to Buy, Your Housing Group, or GOV.UK. You will then need to complete a pre-qualification form and submit it to the housing provider. If you meet the eligibility criteria, you will be invited for an interview and an affordability assessment. If you pass these stages, you will be offered a tenancy agreement and move into your new home.
Conclusion
Rent to Buy is a scheme that can help you achieve your dream of homeownership by offering you a lower rent and an option to buy your home in the future. However, it is not suitable for everyone and you should weigh up the pros and cons before applying. You should also seek independent financial advice and legal guidance before signing any contracts or agreements.