There is a huge number of people in the United Kingdom wanting to get their foot on the first rung of the housing ladder. Sadly, high house prices and low wage inflation have trapped many potential buyers in a cycle of property rental.
If you’re one of the unfortunates stuck in this position then maybe it’s time for you to have a look at the Rent to buy scheme.
The rent to buy scheme was launched by the government in 2010. The aim of the scheme is to help turn rental properties into owned homes.
Housing developers and even private home owners have realised the potential and there are now a multitude of ways and places to ‘try before you buy’.
What is rent to buy
The government’s rent to buy scheme is available on new build homes. Potential buyers can rent the property of choice on a development working under the rule that they will purchase the house between 3 and 5 years later.
Rental is set at 80% of the national average. This allows the tenant to start saving towards a deposit that will be paid down at the point of sale. Currently, the scheme requires tenants have a 5% deposit.
At the end of the rental period between 25% and 75% of the house can be purchased from the government. The remaining portion of the value is held by the government and the house is officially classed as shard ownership.
If the tenant is able to afford the entire sum they can of course purchase 100% of the house.
Who is eligible for rent to buy?
The scheme has been squarely aimed at what’s been termed the squeezed middle; individuals and families that don’t earn enough to afford to buy outright but too much to receive social housing.
There are a number of criteria that have to be met for applicants to be eligible to apply for the scheme:
- Potential applicants must have a connection the local area i.e. they must either live in or be planning to move into the area in which they want to buy a house.
- The current household income must be not more than £60,000 per annum. This is the total income not individual.
- The household must have a minimum income of £22,000. This figure has been calculated on the basis of they buyers ability to save for a deposit.
- Applicants will commit to becoming a home owner within 5 years of joining the scheme.
How To Apply For Government Rent To Buy
When the scheme was originally launched it was incredibly popular but, considering the lack of promotion, you’d be forgiven for thinking that it had just ‘gone away’. In fact, Homebuy is still going strong and there are now even more options available for first time buyers – we’ll cover those in a minute.
To apply for the government scheme, you’ll first need to contact your local HomeBuy agent. The HomeBuy section of the YouGov website has a full listing of approved HomeBuy agents.
On certain development around the country, equity loans can be provided to potential buyers who don’t have enough purchase for the house purchase. YouGov gives a detailed rundown of eligibility for the government equity loan scheme. I advise you to read this as it gives you some excellent examplesof how much you’ll pay back on these loans.
Alternatively, most of the information above can also be found on the main government backed site, www.homebuy.co.uk
If you’re a serving member of the Armed Forces and you’re struggling to get on the housing ladder you’ll find help available at www.afhos.co.uk. This government backed site specialises in helping servicemen and women.
Private and Non-government Rent to Buy Schemes
Rent to buy schemes are an incredibly powerful way of selling houses to buyers who, ordinarily, couldn’t afford to get on the housing ladders. Both property developers, and a small, but growing, number of private home owners, have realised the potential to help buyers and sellers get the home they want.
Like the government scheme, the private sector uses a ‘try before you buy’ approach.
Unlike the government scheme, there’s no commitment to buy. The seller is totally reliant on the strength of the buyers desire to live in a specific area.
As an added incentive, many development companies offer to refund up to 5% of the purchase price if the renter buys they house they’re letting. This money can be pumped back into the purchase cycle and used a part of the deposit.
In most cases, to qualify of the 5% refund, developers require the buyer to have already paid at least of the property value in rent.
There doesn’t seem to be a central source for private rent to buy information so I’ve had a dig round the web to see what I could find. Here’s a listing of the more legitimate looking companies:
http://homes.trovit.co.uk – use the search feature and type in ‘shared ownership london’ (remove London and add the area you’re looking to live in.
http://www.rightmove.co.uk/ – enter the details of the type of house you’re looking for then and select ‘Shared ownership’ from the drop down box. The search results will show only house that are part of a rent to buy scheme (see the image below).