What is Rent to Buy?

The government’s Rent to Buy scheme runs in England, Scotland, and Northern Ireland.

This scheme allows you to rent a new build home from a housing association at about 20% below the market rate for up to five years, depending on where you are in the country.

While living in the home you can make an offer to buy the whole property or look into buying using shared ownership, also known as part-rent-part-buy. This is where you buy a percentage of the property (typically 25% to 75%) and continue renting the rest of the share.

Housing associations sometimes use different names for Rent to Buy homes, for instance, Try Before You Buy.

How do you Rent to Buy?

In order to qualify for Rent to Buy, there are some criteria you need to meet.

  • Your household needs to earn less than £60,000. This ‘household’ could be just you or you and a partner or friend for example.

  • You need to either be a first-time buyer, or someone that previously owned a home but can’t afford to buy on the open market. This could be if you lack a substantial deposit or sufficient income.

  • You’ll also need to have a fairly good credit history.

Local authorities in which the property is based may have further restrictions when it comes to being eligible. For example, some will prioritise first-time buyers over previous homeowners.

Finding Rent to Buy homes can be tricky, but you can check availability and see if you qualify in your area by contacting a Help to Buy agent.

London Living Rent

London Living Rent is a different version of Rent to Buy for buying in the city, though the majority of the homes aren’t expected to be available until 2021.(1)

With this scheme you have to rent for a minimum of three years from a council or housing association. During that time you can buy on a shared ownership basis, while you are given priority for other shared ownership properties in London.

Like with Rent to Buy the household is only allowed to earn a maximum of £60,000 a year to qualify. You also can’t be able to afford to buy in your local area in normal circumstances, even using shared ownership.

Properties to rent will typically cost £1,000 a month,(2) though the Greater London Authority pledged to set the rent for three bed properties at 10% more than for two bed homes, to ensure family-sized homes are affordable.

The rent levels depends on the area, but they’re all based on a third of average local household incomes.

The government has pledged to advertise London Living Rent homes on its Homes for Londoners search tool as they become available.

Renting versus buying

Benefits of Rent to Buy

  • Could be more affordable as you get a 20% discount.

  • By saving money on rent, you have a better chance of saving towards getting on the housing ladder in future.

  • The scheme provides an accessible way of buying using shared ownership.

  • Renting from a social landlord rather than private can arguably provide you with more security.

Downsides of Rent to Buy

  • There are a finite number of properties in each area that are available using the scheme.

  • Properties may still be costly to rent and buy despite the discounted rent.

  • If house prices rise significantly while you’re renting you may not be able to afford to buy even after saving a significant sum.

Shared ownership risks

  • You could get evicted and face repossession if you fail to pay your rent or your mortgage.

  • Mortgage rates could rise, making the portion you own more expensive, while rents in the area could also increase.

  • There are added costs to being a homeowner, including paying for gas, electricity and council tax.

  • If you are a leaseholder, which is common when buying a flat in a building, you still have to pay 100% of the ground rent and service charge on the building, even if you own a small share.

Rent to Own in Wales

Under the Welsh scheme you rent a property for the full rate for up to five years.

Then after two years you can buy the property, with the scheme giving you back 25% of the rent you paid as well as any increase in the property’s value since you moved in to use as a deposit.

If you’re interested in the scheme the Welsh government provides further information as well as contact details for landlords that participate.

Rent to Own in Northern Ireland

In Northern Ireland the government-funded housing association, Co-Ownership, also runs a Rent to Own scheme.

This works where you rent a new build worth up to £165,000 for up to three years, before buying with a deposit raised by a 20% refund of the rent that you’ve paid.

You can consult the Co-Ownership site to have your eligibility checked and apply for Rent to Own, at a cost of £100.

Frequently asked questions (FAQs)

What should I do before applying for Rent to Buy?

Before applying for Rent to Buy make sure you qualify by studying the criteria detailed above. 

Then you should work out how much you can afford to spend on rent by assessing your budget. 

You should check your earnings and outgoings to determine how much you have left to spend on rent every month.

Should I use Rent to Buy?

Seeing as the scheme helps you save money with discounted rent, you need to weigh this up against other ways of saving. 

Could you save more cash by living in a houseshare? Could you move in with a family member to save money for a deposit?

Since the scheme is intended to help you go from being a renter to a buyer, you need to decide how much you want to be a homeowner.

You should also weigh up whether you’d like to buy and live in the properties made available by your local housing association.The attractiveness of the scheme also depends on what the specific housing association is offering, as the level of the discount and cost of renting varies across the UK.

I want to purchase my Rent to Buy property - what next?

Before buying it’s worth taking out a survey, which assesses whether there are any hidden issues with the property that could affect its value or mortgageability. You wouldn’t expect to have an issue with a new build, but when there’s so much money on the line you’re better off safe rather than sorry.

It’s also worth speaking to a mortgage adviser, who’ll guide you through the process of deciding whether it’s best for you to attempt to buy outright or use shared ownership.

Further resources

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Your home could be repossessed if you don't keep up repayments on your mortgage.

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