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If you are looking to purchase your first home, you may be struggling to save for a deposit while you are renting. As of May 2024, average rent prices in England are £1,301. This can make it difficult to save the money required to purchase a house and get on the property ladder. So, is the Rent to Buy scheme a good idea?
The Rent to Buy scheme can provide an ideal solution for first-time buyers wishing to save money for a house deposit. While there are advantages and disadvantages to the scheme, those who successfully manage their finances should be able to save enough money to put down a deposit on a house while they pay reduced rent.
Keep reading to find out more about the Rent to Buy scheme and whether you are eligible for it.
When it comes to home ownership, purchasing your first home can prove very difficult. While you are paying rent and bills every month, it can seem like a huge task to save enough money for a house deposit at the same time. This is where the Rent to Buy scheme enters the picture. This government scheme allows you to rent a new-build home at a reduced rate of rent – typically 80% of the average rent in the area – for up to five years. This breathing room allows you to add the 20% that you save each month on rent into savings for a deposit to buy all of the property or through Shared Ownership, a share of it in the future.
Here is an example of how the Rent to Buy scheme could help you to raise the money for a house deposit over five years:
The Rent to Buy scheme provides first-time buyers an opportunity to essentially ‘try out’ a property before making a full purchase. During the agreed upon duration of the Rent to Buy period , the idea is that paying a reduced price for rent will provide tenants with the opportunity to save the money for a deposit. This can make it the perfect option for first-time buyers that are struggling to both pay rent and save for a house deposit.
If you are a first-time buyer or if you are returning to the property market, Rent to Buy could be the scheme to help you become a homeowner. To be eligible, your household income must be less than £80,000 and you must be currently working or self-employed. Take a look at the full government guidance regarding eligibility on their website: Rent to Buy Eligibility.
While the Rent to Buy scheme can provide the ideal transition from tenant to homeowner, there are a few things to be aware of before applying.
Some of the advantages of applying for a Rent to Buy property include:
Some of the disadvantages of applying for a Rent to Buy property include:
If it comes to the end of your agreed Rent to Buy period and you are unable to pay the deposit to purchase the house, you may have the option to purchase a percentage of the property. Shared Ownership allows you to purchase a portion of a property and gradually increase your ownership, a process that is also known as ‘Staircasing’. This will depend on the rules of the specific housing association that you are renting from, but most tend to allow it.
At Plumlife Homes, we are dedicated to finding you the home of your dreams. To achieve this, we will work tirelessly to ensure that your journey to ownership is as smooth as possible. To find your perfect Rent to Buy property, contact a member of our team today.
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