If you’ve been listening to the latest news over recent years, you’ll probably have heard of Rent to Buy Homes.

Rent to Buy is a government scheme that has been created to make it easier to transition between renting and purchasing a home. Government Rent to Buy schemes in 2021 involves the provision of affordable subsidized rent.

These arrangements are sometimes called Rent To Own, Intermediate Rent, or Rent to Save. All, nevertheless, have the same aim – to make buying a home affordable for more people.

Rent to Buy schemes can be found in Northern Ireland, Scotland, and England. They allow prospective buyers to rent a new build property at a subsidized rent that is around 20% under the market rate.

Rent to Buy properties can currently (in 2021) be rented for a maximum of 5 years. In that time, you can choose whether or not to buy the home or part buy part rent it with a shared ownership arrangement.

The period of reduced monthly rent should allow the tenant to be able to save up enough money to pay their deposit. At the end of this time, you must either move out or buy part of the house or flat.

There is a similar arrangement in Wales, however here it is called Rent to Own. It works in a slightly different way.

You rent the house or flat, paying the market rate for a period of up to 5 years. When 2 years have elapsed you can decide to buy your home. At that time, you receive 25% of the rent paid so far as well as 50% of the increase in the market value of the property since the date you moved into it. This can be used as your deposit on your purchase.

So, how does Rent to Buy work in practice? What are the requirements for prospective buyers?

Here, we take a closer look at how Rent to Buy schemes can help the first-time buyers to get their foot on the property ladder and make it more affordable to buy a house in the competitive 2021 market.

As an authority in the field, we’re sure that you’ll appreciate our insight into the latest developments in this area.

In this article you’ll find:

What is rent to buy and how does it work?

An English, Scottish or Northern Irish Rent to Buy scheme works in the following way:

  • Rent to Buy properties are made available for rent. They have shorthold tenancies and are available at a lower rate of 80% of the local average rent. A tenant can usually choose between a house, a flat or even a bungalow. With a Rent to Buy scheme, it is expected that tenants will use the opportunity to use this short period during which they pay reduced rent to save up a cash deposit. This will then allow them to apply to purchase the property under shared ownership at a later date.
  • Once the shorthold period is over, the tenant can choose to buy the home under a shared ownership arrangement. Alternatively, they can choose to move out. Usually, the period of the lease will be between 6 months and five years.
  • The tenant can choose to make an offer to purchase the house or flat outright or consider a shared ownership scheme during their lease at any time.
  • There are several names in use for the Rent to Buy scheme. It will depend on which housing association the house or flat is owned by which name is used. For example, some schemes are called Buy Rent Save, Intermediate Market Rent, Part Buy Part Rent, or Try Before You Buy. It’s therefore vital to check out the terms of the Rent to Buy scheme that you’re being offered before you sign up.
  • Each Rent to Buy scheme has limited availability. The precise number will vary between different local authorities. Usually, the homes will be new-build properties.

What’s the difference for rent to own homes?

  • The tenant rents a property at its usual rate for a period of five years maximum.
  • At any point between the end of the agreement’s 2nd year and its final ending point, the tenant can make an application to buy the property.
  • When they apply to buy a home, they receive a quarter of all the rent they’ve paid. They also receive 50% of the increase in the property’s value since the time of moving in.
  • This sum of money can then be used as a deposit, or part of a deposit, to buy the property.

Rent To Buy Homes In London in 2021

In London, there is a slightly different Rent to Buy arrangement. It is called “London Living Rent“.

A tenant in the capital will rent their home for under its usual market rent. This allows them to save a deposit. Each tenancy lasts for a minimum of 3 years. During that time, the tenant is prioritised for housing association shared ownership properties.

This brings home ownership within reach of those who are keen to get on the property ladder but who cannot afford to pay the high housing costs in this area of the country while they save up to buy a property.

The capital’s Rent to Buy arrangement has properties available at a typical rent of about £1000 per month (2/3rds of the typical rent paid in the capital).

The exact amount of rent payment will vary depending on the area, however, all are roughly a 3rd of the area’s average rent.

The scheme is designed to benefit those who would otherwise have to make a very high monthly rental payment to a private landlord which would prevent them from saving enough money to ever invest in homeownership.

Specific property guides for living in London

We’ve put together a helpful selection of guides for some of the most sought after areas in London. These guides aim to help people understand the potential rents and costs for living in the UK’s capital.

Am I eligible for the rent to buy scheme?

Rent to Buy is a great opportunity for home ownership if you can meet the following criteria:

  • You have an annual household income of £60,000 or under. Your household could be a single person, or yourself and a partner or friend.
  • You’re either a first time buyer or once owned property but now have insufficient income to buy a home at today’s prices.
  • Your credit history is good.

There are other eligibility criteria and specific circumstances that you must meet too. These vary depending on the area you’re in and which housing association is offering the part buy part rent property.

Certain groups typically have priority for rent to buy arrangements. They include people currently renting social housing from a local council or authority, or from housing associations.

Priority will also usually be given to people who fit in with local priorities and to first time buyers.

You’ll be able to check whether you qualify for a Rent to Buy arrangement by checking with local agents.

Anyone who wants to benefit from Rent to Buy in London must visit the “Homes for Londoners” website. This is a site from London’s mayor which is a guide to the first steps towards future homeownership in the capital.

Unfortunately, not everyone qualifies for Rent to Buy. There are some other financial incentives and government schemes, though, which help provide affordable housing and assist those who cannot currently afford home ownership to purchase the property of their dreams.

These include first time buyers’ property loans, affordable shared home ownership arrangements, and providers of tax-free savings accounts that allow prospective purchasers to start saving for a deposit.

Is a rent to buy a good option?

If you’re eligible for a part rent part buy agreement, you’ll need to decide if it’s right for you. You can weigh up the benefits, risk and value of Rent to Buy for you depending on the offer you receive and whether or not you could find it affordable to pay rent for your tenancy, while also saving for your deposit and trying to live a decent lifestyle.

Reading all the small print is essential to check whether it could be a beneficial scheme or whether it could be a more costly way of buying a house in the long run.

A major advantage of Rent to Buy is that it could give you a way of buying a share of a property that would otherwise never be affordable. There are, however, some pros and cons associated with shared ownership.

Also, the registered providers of these schemes are social landlords. This can give those who are used to renting from their local authority greater security.

There are financial downsides to consider too. For example, if the price of your home increases while you’re renting, you might find buying is no longer affordable for you.

If you rent for a long time, this increases your risk. If you live in Wales, this shouldn’t be as much of a problem since you’ll receive 50% of that increase back so you can use it as a credit towards buying.

This makes it more affordable to get a mortgage and purchase your property, even if it’s value goes up.

Helpful resource: how to furnish your property on a budget?

If you’re interested in getting registered for affordable Rent to Buy housing and eventually getting a mortgage so you can buy a share of the property, it’s important to work out the financial implications and the local registered housing providers first.

You’ll need to consult with mortgage providers to determine your regular payments to see if they’re affordable and find out whether they’ll be willing and able to extend credit to purchasers who are only buying a share of their home.

You’ll also need to find out about any fee you’ll be required to pay which will be added to the expense of moving home.

How to register for a shared ownership scheme

This guide will help you learn how to apply for a Rent to Buy scheme that is registered in England, Northern Ireland or Wales:

  • First, register with your registered in England Help to Buy agent. It’s their job to assess the application before adding you to their latest database. This allows them to make direct contact with you once a property becomes available that suits your needs.
  • Participating landlords will accept your Rent to Own application if you’re a Welsh applicant.
  • If you’re in Northern Ireland, applications are made through the Co-Ownership website.
  • Wherever you’re based, it’s important to be proactive. You need to search the website of your Help to Buy Agent regularly.
  • If you spot a property that you like, telephone the number on the advert to see if you would fit the necessary criteria.
Mick Silver

Mick Silver

Mick Silver is the CEO and co-founder of Moovshack. With over 20 years in the property industry. After working with traditional estate agents, Mick decided to launch Moovshack; a fully interactive property app.