Rent to Buy helps tenants in England save for a deposit to buy a home by offering properties at a discount of around 20% below market rent. There are different variations of the scheme available depending on where you live, for example, London is covered by a similar, but separate scheme called London Living Rent.
We look at how rent to buy style schemes could give you a welcome boost onto the property ladder, how to find out if you’re eligible, and how to secure a mortgage for scheme properties.
What is the Rent to Buy scheme?
The government rent to buy scheme is designed to offer reduced price rental properties that you can later buy. The scheme allows you 2 years to rent the home at the reduced rental rate, during which time you’re expected to save a deposit. Extensions may be given if you haven’t saved enough in 2 years, but you typically have a maximum of 5 years in total to purchase the property.
You then use the money saved on rent as your deposit to purchase that rental property. You must specifically select a property that’s offered by the scheme in your area, which will typically be owned by a housing association, or in some cases, the local council.
How does it work?
Rent to buy scheme properties can be found in England either through the Shared Ownership scheme services, or in some cases, directly via your local council or housing association. This excludes properties in London, which are listed separately through the London Living Rent Scheme.
Once you’ve rented your home for long enough to save a deposit, you can ask to buy your home. Keep in mind that you’ll be charged the current market value of the property, which may be higher than when you first rented it.
If you can’t afford to buy the rent to buy property in full, you will also have the option to buy a share of the home through the Shared Ownership scheme.
Eligibility criteria
To be eligible for Rent to Buy across England, but excluding London, you must:
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Be in full or part time employment
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Be a first-time buyer (or returning to home ownership following a relationship breakdown)
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Be able to afford to pay the rent and save for a deposit at the same time - so effectively, afford the full market rent of the property before the 20% reduction
Keep in mind that although the above eligibility criteria applies nationwide, each housing association may also have their own additional criteria.
You can find further information on the rent to buy scheme on the Gov.uk website. Please note that whilst they work in a similar way, the London Living Rent Scheme, and Rent to Own scheme (Wales) have different criteria.
How to get a mortgage through the Rent to Buy scheme
Only a few lenders offer mortgages that can be used alongside the rent to buy scheme, so it’s a good idea to speak to a broker, like ourselves, if you’re hoping to borrow for this purpose. Typically smaller, more niche lenders and building societies are most likely to consider this, whereas high street lenders tend to shy away from rent to buy purchases.
In some cases, lenders will only support rent to buy mortgage applications if the borrower is buying the property as a whole, however, some may accept rent to buy scheme purchases through the shared ownership route.
You can book a free, no-obligation chat with a broker who specialises in arranging mortgages through the scheme below:
Begin your mortgage journey
Which locations is it available in?
There are rent to buy housing scheme properties available throughout England (excluding London), but not every region or council has rent to buy schemes available. While some local councils partner with housing associations to provide these types of home, in most areas you’ll apply directly through the housing association.
You may also find that individual housing associations use different names for their local version of the scheme, for example, Rent to Save or 'Try Before you Buy'.
The following housing associations provide rent to buy homes in each region at the current time, however, please locally as schemes may open or close at any time:
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North East & Yorkshire: Karbon Homes, believe housing, Thirteen Group, Yorkshire Housing, Home Group
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North West: Your Housing Group, Jigsaw Homes, Riverside, One Manchester, Torus.
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Midlands: Citizen Housing, Longhurst Group (Amplius), Platform Housing Group, Midland Heart
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South East & East: Hightown Housing Association, Sovereign Network Group, Orbit, Southern Housing
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South West: Sovereign Network Group, LiveWest, Plymouth Community Homes
Why can’t I use the rent to buy scheme in London?
Because property prices in London are significantly higher than the rest of the country, they have their own distinct scheme known as ‘The London Living Rent Scheme’. Although this is based on the same principle of allowing you time in a rental property to save a deposit before you buy it, there are some key eligibility and term differences:
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Rent is typically based on a third of the local household income, rather than 80% of the property’s rental market value
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Tenancies are longer, to give a greater opportunity to save a deposit on a more costly home. This is usually a minimum of 3 years, but may be longer, depending on affordability
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You must already live or work in London to be eligible
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You must earn less than £67,000 and not be able to buy a home in the local area through standard means
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This scheme typically prioritises shared ownership over full purchase
At the current time, the following housing associations support this scheme, but please note that this is subject to change at any time:
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L&Q
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Peabody
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Clarion
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Notting Hill Genesis
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Hyde
Pros and cons
The rent to buy scheme can be a helpful path to home ownership for some, but it’s important that you consider both the positive and negative factors:
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Pros of rent to buy |
Cons of rent to buy |
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You have access to a home at 20% lower than market value |
You’re limited to homes built specifically for the scheme, which means there may not be one you like, or one available in the area you want to live in |
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This saving would allow you to build a deposit you likely wouldn’t have afforded otherwise |
The price may have risen by the time you come to buy, making it unaffordable with the deposit saved |
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It gives you the option to live in the property for a couple of years before committing to buy it permanently - plenty of opportunity to know whether it’s the right fit for you |
In some areas, particularly those with higher average property prices, there may be a waiting list for this type of home |
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It can be combined with the shared ownership scheme, which may allow you to buy even if you haven’t saved enough to purchase the home in full |
Buying through the shared ownership scheme can make your property harder to sell, especially if you only own a portion of it |
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You have the guaranteed first option to buy the home, should you want to at the end of the tenancy. Nobody can outbid you |
Can you use Rent to Buy with a private landlord?
No, you can’t use the scheme if you have a private landlord. You’ll need to apply for one of the properties specifically built to be sold through the rent to buy scheme.
Outside of the government scheme, it’s possible to arrange a ‘Lease Option’ with your private landlord. This usually involves paying an option fee upfront, giving you the legal right (not obligation) to buy the property at a set price within a specific timeframe. However, due to the abolishment of fixed-terms as part of the Renters’ Rights Act, this is likely to be less common in the future.
Why choose Money Helpdesk for your mortgage?
Navigating the mortgage market can be complex when you’re looking for a mortgage to purchase a property from an affordable housing scheme, as not all lenders support them. This is particularly the case for rent to buy, as there are only a handful who accept applications from this scheme.
At Money Helpdesk we work with lenders from across the market, including some of the niche lenders who are willing to look at rent to buy mortgage applications. We have specialist knowledge of this type of purchase, and can help you every step of the way. Get started now to speak to a rent to buy mortgage expert.
FAQs
No, there are no rent to buy or similar schemes available in Scotland, although their government does offer other affordable home ownership schemes through the LIFT initiative.