Rent To Buy Scheme – Is This A Good Option For You?
Getting a property is not an easy task, especially for first time homebuyers. But with the rent-to-buy scheme available as an option, this somehow makes a big difference in property acquisition. Not a lot of people prospecting to buy a property have the financial capacity to produce the exorbitant amount of deposits that most property sellers and lenders require.
The rent-to-buy scheme allows people to rent their homes and then later on get ownership of the home. This is a scheme designed by the UK government to make it easy for investors to purchase their property. You can rent the property for a number of years, usually 3 years but extends up to 5 years, at a subsidised rental fee, which is normally just 80% of the property’s actual market value.
This is the government’s way of helping first time homebuyers to save for their deposit when buying a property. Eligibility for this scheme is not limited to first time homebuyers, but also to previous homeowners who are no longer capable of purchasing on their own capacity, those affected by the property crash, and low-income families. While there is social housing available for those who really can’t afford buying their own property, they are mostly reserved for the most destitute (little to no income at all). This makes it very difficult to qualify for the program.
What’s good with the rent to buy scheme is the fact that you will not be forced to purchase the property when the covered period ends. So even after the five years are over, you don’t have the legal obligation to purchase. The government is simply giving you an ample time to save for deposit by giving you a subsidised rent for 5 years. If you still don’t have the financial capacity to buy the property, you can opt for shared ownership, which means you can part-rent and part-buy. However, if you decide not to purchase for whatever reason, you will lose the privilege of subsidised rent and the risk of being evicted from the property.
The rent-to-buy scheme is an attractive option for homebuyers. But what happens if you can’t qualify for the government program? Is it still possible to negotiate rent-to-buy deals with sellers? The answer is yes. For as long as both sellers and buyer agree to terms and put it in writing, then it’s possible to enter a rent-to-buy agreement on your own. Granted, it’s always best to consult with a solicitor first.
There are investors who have done rent-to-buy deals. Probably the most prominent in the UK is Rick Otton, who has had podcast episodes that touched on the subject matter. If you are interested in alternative means in saving for deposit money, then you may find excellent info on the We Buy Houses Radio podcast.