Our guide to the Rent to Buy scheme
What is Rent to Buy? Could it be a scheme to suit you? Find out in this guide.
What is Rent to Buy?
The government’s Rent to Buy scheme runs in England, Scotland, and Northern Ireland.
This scheme lets you rent a new build home from a housing association.
The rent will be about 20% below the market rate for up to five years. This amount depends 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 shared ownership.
Shared ownership is also known as part-rent-part-buy. This is where you buy a percentage of the property, often around 25% to 75%, and continue renting the rest of the share.
Housing associations sometimes call Rent to Buy homes, Try Before You Buy.
How do you Rent to Buy?
To qualify for Rent to Buy, you need to:
earn less than £60,000 as a household. This could be you alone, or you and a partner or friend
be a first-time buyer, or someone that has owned a home before but cannot afford to buy on the open market
have a good credit history
Local authorities may have more rules when it comes to being eligible. Some will prioritise first-time buyers over previous homeowners.
Finding Rent to Buy homes can be hard. 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. Most homes under the scheme are not expected to be available until 2021.(1)
You have to rent for at least three years from a council or housing association. During that time you can buy using shared ownership while still being a priority for 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 often cost about £1,000 a month to rent (2).
The Greater London Authority pledged to set the rent for three bed properties at 10% more than for two bed homes. This is to ensure people can afford to buy family-sized homes.
The rent 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
With a Rent to Buy you can:
get a 20% discount so it could be more affordable
save money on rent. So you have a better chance of saving towards getting on the housing ladder in future.
buy using shared ownership
rent from a social landlord rather than private which can give you more security
Downsides of Rent to Buy
With a Rent to Buy:
there's a set number of properties in each area available using the scheme
properties may still cost a lot to rent and buy despite the discount
if house prices rise a lot, you may still not be able to afford to buy, even after saving
Shared ownership risks
With a shared ownership:
you could get evicted and face repossession if you fail to pay your rent or your mortgage
mortgage rates could rise, making the part you own more expensive. Rents in the area could also go up
there are extra costs to owning a home. You'll have to pay for gas, electricity and council tax
you still have to pay all the ground rent on service charge on the building if you're a leaseholder. Even if you own a share
Rent to Own in Wales
Under the Welsh scheme, you rent a property for the full rate for up to five years.
After two years you can buy the property. The scheme will give 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.
Read more and find contact details for landlords on the Welsh government website.
Rent to Own in Northern Ireland
In Northern Ireland, the government-funded housing association, Co-Ownership, runs Rent to Own.
It works when you rent a new build worth up to £165,000 for up to three years. You then buy with a deposit raised by a 20% refund of the rent that you’ve paid.
See if you're eligible and apply for Rent to Own on the Co-Ownership website.
More about Rent to Buy
Before applying for Rent to Buy make sure you're eligible.
Then work out how much you can afford to spend on rent by looking at your budget.
You should check your earnings and outgoings to see how much you have left to spend on rent every month.
With the scheme you should weigh up:
saving money through the scheme with discounted rent against other ways of saving
if you could save more living in a houseshare or moving in with family to save money for a deposit
the discount and cost of rent the housing association is offering. This varies across the UK
if you'd like to buy and live in the properties your local housing association offers
Since the scheme aims to help you go from renting to buying, you need to decide how much you want to own a home.
Before buying it’s worth taking out a survey. This is to see if there are any hidden issues with the property that could affect its value or the ability to get a mortgage.
You would not expect to have an issue with a new build, but it's best to be safe when there’s so much money on the line.
You may want to speak to a mortgage adviser. They'll guide you through the process of deciding if it’s best for you to try to buy outright or use shared ownership.
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