Can a Rent to Buy scheme get me on the UK property ladder?

How on earth can anyone get on the property ladder these days? Mortgages are so difficult to obtain because the banks have tightened their lending criteria. Some would say that is a good thing but the sudden change from reckless lending to ultra-conservative lending has had the knock-on effect of stifling the property market. Consequently, the lack of buyers has driven house prices down.

At the same time, people who were lent 125% mortgages have watched the value of their home plummet to well below the value of their mortgage. Of course, if they don’t have a need to move on, they just need to sit tight and pay their mortgage repayments. This is where the double whammy of the credit crunch, the recession and now even the spectre of a second dip in the recession.

The banks are also sitting on a huge mountain of unreliable debt and there will be a ‘tsunami of repossessions’ in the coming year or two. Isn’t it ironic, then, that at the same time as many homeowners have mortgage they don’t want, there are many people that can’t get started on the property ladder for lack of a mortgage.

Don’t pay Dead Rent

Traditionally, in the UK, an Englishman wants to own his castle and objects to paying dead rent. By owning your own home, you have the right to decorate it any way you want. You can make any improvements you wish and you are not beholden to a landlord or a restrictive tenancy agreement. You can see it from the landlord’s point of view. He doesn’t want you to paint the living room purple because the next tenant will probably want it another colour. If you put up pictures with nails, he has to fill in the holes and redecorate – normally at the expense of your deposit.

Suppose you notice damp coming into the house. You’ll want the landlord to fix it before you kids’ clothes go mouldy or it triggers their asthma. But he’s got no interest in shelling out yet more money. He’s making a nice profit from your rent and you may find it difficult to get the simplest repairs done.

You may get lucky and secure a long tenancy and make the changes you like but you are always just two months from being moved on. This is why most people want to own their own home.

So, what’s the answer? It’s not rocket science – it’s  Rent To Buy also known as Rent 2 Buy and Rent To Own.

How Does Rent To Buy Work?

Different companies do it differently but it is essentially the same type of arrangement with each of them. You agree a price today to purchase the house at a future date. This price would typically be around the current market price or a few percentages points above. Some companies will ask you to pay a small deposit of around 5% which still compares favourably with the banks asking for 10%-25%. You will also pay slightly above the market rent. How much above will depend on how much deposit you paid in the first place. Normally this extra rent is offset against the purchase price or even added to your deposit.
At the future date, or any time before that, you have the choice whether to exercise your option to buy at the agreed price. You would buy it in the normal way by using standard mortgage.
The expectation is that, over this time, you will have saved a considerable amount towards the deposit and fixed any problems that were preventing you getting a mortgage in the first place.

Everybody Wins with Rent To Buy

There are so many advantages for Rent To Buy schemes that it is very surprising that it has taken so long to arrive in the mainstream of house buying solutions in the UK. The original house owner who was in trouble has been saved from repossession and walks away with his credit history intact and able to start afresh. The tenant buyer wins because he has a clear route to house ownership. The investor/landlord wins because he has a tenant buyer who looks after the house as if it was his own – because it will be!

The tenant also has another advantage in a Rent To Buy scheme because he has only an option to buy the house but not an obligation. If he subsequently decides that home ownership is not for him, he can simply walk away. It’s a sort of ‘try before you buy’ for a house. Most companies will charge an administration fee for them to find another tenant buyer.

How do I find a Rent To Buy property in the UK?

Well, this is the hard part. If you consider how it all works, you’ll understand just how difficult it is to match motivated vendors with tenant buyers. It’s a bit like looking for two needles in a haystack and when you find them hoping that they match. Some companies operate websites to find the sellers and build up a list of available properties. Other companies operate websites to offer these properties to tenant buyers. Nine times out of ten, the properties are not in the area that the tenant buyer wants to live. I suggest you sign up to the mailing list so you can be notified as new properties become available.

Get-On-The-Property-Ladder.co.uk

Get-On-The-Property-Ladder .co.uk has a mission to enable tenant buyers get started on the property ladder. We work closely with other UK property sourcing companies to find the best properties and then match suitable tenant buyers with a Rent To Own scheme.