Rent to Buy

As people struggle to get on the property ladder, home ownership schemes such as Shared Ownership and Rent to Buy are increasing in popularity. Rent to Buy is particularly popular as it gives people opportunities other than private renting with no end in sight. Below we explore the Rent to Buy scheme, why it's popular and how it might be perfect for you. 

What is Rent to Buy?

Rent to Buy (RTB) is a government scheme that allows individuals to rent a new home at a reduced rental amount while providing them with the opportunity to buy the home during that time - whether through Shared Ownership or via an outright sale.

Rent to Buy is sometimes referred to as Rent to Save or Rent to Own.

This scheme is designed to ease the transition between renting and buying by subsidising a percentage of the rent. When they join the scheme a buyer rents a property at below market value for up to five years, allowing them to use the remaining amount to save for a deposit. After the end of the period, the renter either has to purchase or leave.

How Does Rent to Buy Work?

If you want to own your home but you’re struggling to get a deposit together, Rent to Buy is an ideal path for achieving home ownership.

Provided you’re a working household, you can move into a brand-new Rent to Buy property and rent it on an Assured Shorthold Tenancy basis for up to five years. During this time, you’ll pay a reduced rent of 80% of the current market value, with the other 20% going towards a deposit you can use when you look to purchase.

During the tenancy, you have the option of purchasing the property on either a Shared Ownership or outright sale basis. If you’re looking to buy through Shared Ownership, you can do it between year one and five. If you’re buying on an outright sale basis, you can do so at the end of the five-year fixed period.

Is Rent to Buy Worth It?

As a government scheme, Rent to Buy is a unique system that provides a wide range of benefits, particularly for those struggling to get on the property ladder. The benefits of Rent to Buy include:

• You can move into a new home while still saving towards the purchase of your own property.
• You pay reduced rent on a property - usually 20% less than the standard market value.
• You can get used to your new surroundings, safe in the knowledge that you can buy your rental property.
• You have the flexibility of choosing Shared Ownership or Outright Sale for your final home purchase.

It’s important to remember that Rent to Buy is a long-term commitment and if your circumstances change during the RTB period, you’ll be unable to buy the property.

You also typically have to buy the property at the value it is when you buy, not when you begin renting. That means if prices increase between the beginning of the rental period and the purchase time, it may cost you more than you think.

Finally, Rent to Buy is not available on every property or every location, meaning you may not be able to buy in your dream area. That said, if it is available on a property in a desirable location, it’s a great opportunity to get into homeownership.

Who is Eligible for Rent to Buy?

If you’re looking to enter the Rent to Buy scheme, it’s important to check that you’re eligible. There are several criteria you have to meet including:

• Be part of a working household
• Not be a homeowner
• You plan to live in the property

An important thing to remember is that the Rent to Buy scheme isn’t necessarily aimed at those who can’t buy a property but at those that can’t get a deposit together because they’re renting.

Your household income typically needs to be under a maximum limit - usually £60,000 - and generally you have to be a first-time buyer, although this may come with exceptions.

Finally, you require a good credit history to demonstrate that you can afford the rent, as well as the future mortgage payments.

When you’re ready to start your journey to becoming a homeowner but don’t have the deposit for a Shared Ownership property, Rent to Buy is the ideal first step. At Platform, you can speak with us and we’ll help you get started.