What is Rent to Own?
When you rent from a Landlord you do not have ownership of the property and every penny of the rent you pay goes to your Landlord. People often describe this as 'dead' money. When you Rent to Own you get all the benefits of being a 'homeowner' without the hassle or worry of having to get a mortgage from the outset. You find a property that you would like to eventually buy, live in it as a tenant and have an option to buy it at any time during an agreed fixed period, at a price fixed at the start.
Who is it for?
Anyone wishing to get on the property ladder without the need to get a mortgage first. The start up costs are relatively low so it is ideal for would-be first time buyers!
What is an Option to Buy?
It's a legal agreement that gives you the right (but not the obligation) to buy the property from the owner at an agreed price and within an agreed fixed period, typically 2-5 years. Under the terms of this agreement the owner is obliged to sell to you if you decide to exercise your option.
Option agreements are a relatively new approach to buying residential property in the UK, but they are a very common method of buying in other parts of the world like the USA and Australia.
Do I need a solicitor?
Whilst it is possible to draw up these agreements without using a solicitor, our advice is to always use one. This ensures that you receive proper impartial legal advice and most importantly that you are fully protected under the agreement. We are able to recommend suitable solicitors who are experienced in this field should you require us to.
How much does it cost to get started?
OK. Here are the basics you need to bear in mind when you agree an option to buy:
- you will need to pay some 'getting started' money which would typically be between 2-3% of the agreed purchase price. This money is deducted from the final purchase price of the property.
- you will have some legal costs, although in some cases the seller may pay these for you.
What are the monthly payments?
You have to pay an agreed amount of rent to the seller during your option period. In addition to this you will pay a small amount extra which will be deducted from the agreed purchase price when you take up your option to buy.
How long does it take to set up?
On average between 2-4 weeks from signing the paperwork to moving in.
What happens at the end of the option period?
You have the option to buy the property at the agreed purchase price in which case your 'getting started' money and any additional monthly payments will become part (or possibly all!) of your deposit. You will also benefit from any increase in value in the property. However, if your circumstances have changed and you do not wish to buy the property, you can simply give 1 months notice and walk away.
I am currently on Housing Benefit - can I Rent to Own?
It is not advisable. Ideally you need to be in full time employment with enough income to cover your monthly rent plus the additional payments and bills on top.
You can always come back to us when your circumstances have changed of course!
How can you help me to find a Rent to Own property?
First of all you need to fill in the ENQUIRY FORM and submit your details to us. Once we know a little bit about your circumstances and what you are looking for and where, we can match you up with potential properties, arrange viewings with you, and hopefully set you on the first rung of the property ladder!!
Can you give me an example of how Rent to Own might work?
OK. Let's say you have access to £3,500 for the up front costs and we find you a suitable property that is available on a Rent to Own basis. We help you secure an Option to Buy it for, say, £100,000 in 3 years time.
Let's assume the 'getting started' money required by the seller is 3% of the purchase price, so you will have to pay £3,000 leaving you with £500 towards your legal fees.
The agreed monthly rent to the seller is set at £500, but you can afford to pay an extra £150 every month towards your deposit.
Over the course of 3 years you will have saved 36 x £150 = £5,400 plus the £3,000 getting started money giving a total of £8,400.
Let's also say that we match you extra monthly payments of £150 for the first 12 months. That's another £1,800 towards your deposit giving a total of £10,200 (10% of the purchase price!).
You will also benefit from any increase in value of the property over the 3 year period either from any improvements you have made and/or any rise in house prices generally. So, a 6% annual rise in house prices would mean the value had increased to £107,000 but you still only pay £100,000!
I want to apply for Rent to Own - what do I do next?
You just have to submit your details via our online form and we will get back to you to discuss your requirements.
