Under the scheme the Government will provide social landlords with £400 million worth of low-cost loans to build 10,000 new homes and rent them to those people on low incomes who are seeking to purchase a home of their own. The social landlords will then have 16 years in which to pay back the low-cost loans. The properties to be provided under the Rent to Buy Schemes will consist mainly of 1 and 2 bedroom properties with half of the allocated £400 million funding to be allocated to London.
Under the Rent to Buy scheme households who would normally be eligible to purchase a Shared Ownership property will be able to rent the property at less than a market rent for a specified period enabling them to build up a deposit towards either purchasing the whole or part of the property. The advantage to the tenant/buyer is of the Rent to Buy scheme is that having had the “breathing space” to save for a deposit any share in the property they are then able to purchase a greater share of the property they would otherwise have been the case.
For the first 6 months to 7 years (depending on the social landlord), the tenant will enjoy rents that have been capped at 80% of the local market value the idea being that this initial “honeymoon” period will provide them with the financial breathing space to save for a deposit towards purchasing the property.
At the end of the discounted rent period the tenants will be offered the opportunity to buy the whole of the property or part of the property under a Shared Ownership scheme.
If at the end of the discounted rent period the tenant does not or cannot purchase all or part of the property, they will have to leave the property. The requirement to leave the property is largely due to the fact that the social landlords are required to keep the homes available for affordable rent until the loans are fully repaid.
The terms used for the rent to buy schemes differ from one social landlord to another with the schemes been named variously “Try before You Buy”, “Rent Save Buy”, “Rent to Own” and the terms on which the schemes are run may also differ. Take out some social landlords even offered to pay back the rent paid after certain period if the tenant exercises the right to purchase the property.
These homes will be aimed at young people who wish to purchase their own home but are unable to safe a deposit, people on benefits will not be eligible to go on these scheme. This rent to buy scheme is seen as having a threefold benefit-increasing the provision of low-cost rented accommodation, increasing the number of first-time buyers and helping to boost the number of new properties being built.
In order to qualify the potential tenant(s), must:
· Have a household income of less than 66,000 a year.
· Be a first time buyer, or someone who used to own a home but can’t afford to buy one on the open market now
· Have a good credit history
The precise criteria for eligibility for a Rent to Buy scheme will vary from one social landlord to another.
Rent to Buy schemes are not as readily available as Shared Ownership or Help to Buy schemes, their availability varies substantially depending on the area in which you wish to live. It is important to note that the discounted rent period and the length of the Lease to the property may vary from property to property.