Rent to Buy Schemes, Explained
(Last Updated: 05/10/2022)
05/10/2022
202
4 min read
How often does someone in the UK ask themselves 'How can I save for a deposit, when I'm spending so much on rent?!' - We'd guess that number is pretty high. The Rent to Buy scheme is designed to help you save for that important deposit, while living in the home you hope to buy.
What does Rent to Buy mean?
Rent to Buy is a government scheme, which subsidises your rent on certain new build properties. You pay 20% less than market rent and save the difference toward your deposit. After a certain amount of time (usually at least 5 years), you will have to:
- Buy the property;
- Buy a part of the property, through shared ownership;
- Apply to extend your time to continue renting and saving, or;
- Move out of the property.
If you do not buy at this stage your landlord could sell the property to someone else, or continue renting the property at market rent.
There is very limited availability on these schemes and there are strict criteria to apply. The rental lease can be anywhere from 6 months to 5 years, but you can buy the home in full, or with shared ownership at any time.
Different housing associations have different terms, so it is extra important to check the terms carefully before you sign up.
How does rent-to-own work?
Rent to Own is the Welsh equivalent. Just like the English version, you rent for up to 5 years; however, you pay full market rent. Between the end of years 2 and 5 you have the option to buy the property.
When you apply to make the purchase you will receive 25% of all of the rent back, as well as 50% of any increase in the value of the property. This amount goes towards your deposit.
What is London Living Rent?
This is the Rent to Buy scheme in London. Tenancies run for a minimum of 3 years, during which time you will be prioritised for shared ownership homes - so you can buy a share of the property as soon as possible. The rent is subsidised by 33.33%, placing the average London Living Rental at around £1000 per month. Am I eligible for rent to buy?
The affordability criteria are based on your household. This can be you alone, or you and a friend, or partner who you will live and purchase with. You must be working and earn together less than £60,000.
You must be intending to purchase your home within 5 years of the start of your lease and have a good enough credit rating to secure a mortgage when you come to purchase the property.
You must be a first time buyer, or you owned your own home in the past but cannot afford to purchase on the open market now. For example, your relationship with your previous joint owner has broken down and you can't afford to buy alone.
Each housing association will apply their own additional criteria, so you will need to check whether you are eligible with each one in your area.
Priority is often given to existing tenants of the housing association, or council tenants. If the development is on a rural development site, then you'll get priority as a current resident, or if you have a family or employment connection to the area.
How do I apply for rent to buy?
The first step to finding your rent to buy property differs in each country:
England | |
London | Visit the Mayor of London's page to find out more and use the property search to find living rent properties. |
Wales | |
Northern Ireland |
Scotland's Help to Buy scheme is now closed. There are shared ownership or shared equity options available through mygov.scot
Frequently Asked Questions
Deposit
Landlord
Written by:
Caragh Bailey
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
Reviewed by:
Andrew Boast
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
