What is Rent to Buy and How Does It Work?
For many first-time buyers, it can be difficult to afford a deposit for a house. But, don’t worry – several schemes can help you to buy your own home. One of these schemes is Rent to Buy. So keep reading to learn more about how it works.
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What is Rent to Buy?
What is Rent to Buy?
Rent to Buy is a government scheme that helps young and first-time buyers afford a home. Basically, it lets you rent a new build property for 20% less than the market rate rent price. This allows you to save up for a deposit to buy a house at a later date, as you will be saving money on rent.
There are around 10,000 new homes involved in this scheme, and they are mostly one or two-bedroom apartments.
How does Rent to Buy work?
Rent to Buy allows first-time buyers to rent a new build at 80% of the market value for a minimum of seven years. The renter then gets the first refusal on buying the property. Rent to Buy’s main aim is to allow you to save up money over seven years to put down a deposit on the house (or another one) at the end of the tenancy. However, there is no obligation to purchase the home if you decide you don’t want to.
In general, the lease period will last between six months and five years. The length of the lease will depend on the type of property you are renting. At any point during the lease, you are allowed to make an offer on the house or even rent part of the property and buy a part of it.
Who is eligible for Rent to Buy?
You can apply for Rent to Buy if you have a yearly household income of less than £80,000. A household can be you, you and a partner or you and a friend. The scheme is open to first-time buyers or people who have bought a home before but now cannot afford to buy now. You must also have a good credit history to be considered for the scheme. There are other criteria that you must match in different areas, so it’s always a good idea to double-check if you are eligible in your area.
Should I apply for Rent to Buy?
If you are eligible for Rent to Buy, it is a personal decision whether or not you decide it will be beneficial for you. Offers from different housing associations are normally very varied, so you need to make sure you read each offer very carefully to work out whether it is the right decision for you. Something to keep in mind is that by using the Rent to Buy scheme, you will get access to properties that you otherwise may not be able to afford.
If you decide to apply for the scheme, it is important you speak with an independent mortgage advisor and work out all the costs. You not only need to be able to afford the rent but if you decide to buy the home, you also need to factor in the costs associated with that.
How do I apply for Rent to Buy?
Depending on where you live, the application process for Rent to Buy differs. If you live in England, you need to register with your local Help to Buy agent. They will look at your application and help you get started. You will be added to a waiting list, and they will get in contact when a property becomes available. If you live in Wales, you can apply via landlords who participate in the scheme. In Northern Ireland, you need to apply through the Co-Ownership website.
Rent to Buy is a great way to get first-time buyers onto the property ladder in an affordable and sustainable way. If you think you are eligible and interested in the scheme, you could be well on the way to your dream of owning a home… sooner than you think!