Rent to Buy Scheme
Rent to buy is an initiative which aims to help to-be first time property owners get on the property ladder. If the person intending to buy their first property does not have a deposit then this scheme is intended to help. Rent to buy is also known as rent to save in some areas.
The government introduced rent to buy for the development of ten thousand homes, mainly, one or two bedroom homes.
Rent to buy behaves differently in Wales as it does throughout the rest of the UK. Typically rent to buy allows the tenant to pay 20% less rent than market value, with the aims to use the 20% saved to put towards a deposit, which at the end of the tenancy will put towards buying the property. If they chose not to buy the property then the tenant will leave.
How does the rent to buy scheme work?
In more detail, the tenant rents a property usually for around 2 years but can be anywhere between 6 months to 5 years, depending on different factors, such as the housing authorisation or type or building being rented. The tenant will pay 20% less rent than market value, with the intent of using the savings to save towards the purchase of the property. Once the tenant comes to the end of the tenancy period they should purchase the property of vacate the property.
Who can take part in a rent to buy scheme?
The rent to buy scheme is aimed towards those on low income. To take part in a rent to buy scheme the following criteria applies. The applicant must be a first time property owner and the overall income of the household must be lower than £60,000 annually. If the applicant is joining a rent to buy scheme within London the income threshold is increased to £64,300. The applicant should check with their housing authority to apply and to check if they fit the application criteria. The tenant will likely have their credit rating checked.
The rent to buy application process will vary based on who the applications local housing authority is and where they are applying. The applicant will have to contact their local housing authority or council where they will be added to an applicant waiting list. Once the council or local housing authority has identified an appropriate property for the applicant they will make contact with the applicant.
Should I take part in the rent to buy scheme?
If you are currently renting a property and would like to save to purchase your first property but are struggling to save for the deposit then this scheme may be helpful. The scheme allows the applicant to pay 20% under market value on rent, hopefully the reduction will allow for the tenant to save for a deposit which can be put towards the mortgage of their first purchase.
Another scheme which can be considered if interested in the rent to buy scheme is the shared ownership scheme. The will allow the applicant to purchase a share of the property, and rent the remaining part. This means that the mortgage will be less and less deposit will be needed.