How does rent to buy work?

How does rent to buy work?  


Sometimes when you’re paying rent it can feel like you’re waving goodbye to your future home’s deposit each month. So is there something that you can do about it? One route you might not have heard of yet is looking to a rent to buy scheme.

Rent to buy houses are often known by a few other terms like: rent to own, rent-save-buy, try before you buy, rent to save, or (in London) the London Living Rent. Whatever name they’re known by, this scheme is in place to help young buyers be able to afford their first homes. So what exactly is a rent to buy house? And how do you go about getting one? Let’s dive in!


What are rent to buy homes?

Rent to buy houses are ones that you can rent while paying a discounted price. The idea behind it being that the money you save from the discount each month can go toward saving for a deposit to buy a home. The rent you’ll be paying will be 20% below the average rent for similar properties in the area. This is known as “intermediate rent” and includes service charge in it if it applies to your property.

So, for example, if the average rent paid in your area on similar homes is £1,800 pcm, you would pay £1,500 a month instead. You would shave £300 a month off your rent, and in 5 years’ time, you could have saved £18,000 to put towards your deposit.

In general, rent to buy homes are new builds. This is because the loans the government provided as part of the rent to buy scheme largely went to housing associations and landlords for social housing to build new homes to then add to the scheme. The homes are often one or two-bedroom flats that are aimed at young buyers.


Are you eligible for a rent to buy house?

Now we’ve covered what a rent to buy house is, you’ll probably want to know whether you can get one or not. So, who is eligible to get a rent to buy home? Well, this depends on the housing association you go through, but there are some rules in common:

  • You must be a working household. Your household can be just you, or you with a partner or a friend.
  • Your income will usually need to be below a maximum value. This varies by the association you go through but is often around £60,000.
  • You should be a first-time buyer. This rule has the most exceptions and will vary based on the association you go through. A common exception is if you’ve previously owned a home but are unable to afford one now.

In addition to these rules and any other your association might have (it’s always worth checking!) you’ll also need to follow any steps to secure your tenancy in the first place. This could be things like a credit check, referencing, or paying a holding deposit.

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How does renting to buy work?

If you’re thinking of getting a rent to buy house, I the next question is how does the scheme actually work? Here are the main points:

  • Usually, you will rent the rent to buy home for around 5 years
  • After a minimum period of time, you’ll then be given the option to buy it - this is usually around 6 months to a year
  • From that point, you’ll have a periodic tenancy which you’ll continue to renew while you live in the home but do not buy it
  • Some rent to buy schemes have a maximum period of time - this is usually 5 years, from that point you’ll either have to buy the home or move out of it
  • As its current tenant, you’ll be given “first refusal”, which essentially means you get first dibs on buying it before the home can be sold to anyone else

When you buy the home it’s important to note that you’ll be buying it at its current market price, not from when you first moved in. So if the market changes you might need to adapt to house prices change too.  


How do I find rent to buy houses near me?

Okay, so now you might be wondering how to find rent to buy properties near me? Rent to buy properties are not available everywhere, so you’ll definitely want to check if there are any in your area before setting your heart on one.

A good way of doing this is by contacting your local Help to Buy agent. You can do this by finding them through the government’s website.


A few final tips…

The main thing to consider when looking into rent to buy houses is whether they suit your situation. Do you meet the eligibility criteria? Can you see yourself wanting to purchase the house? Are you okay with a long term agreement like this? If your answers are all yes then renting to buy could be right for you.

If you’re a first-time buyer looking for more help, why not check out some of our other articles written just for you:

Urban Jungle is not a financial advisor and information in this article should not be taken as advice or recommendation.