It may be a ‘buyers market’ at the moment in the property market, but for anyone looking to buy their own home and are struggling to raise the deposit, times are tough. However, “rent to buy” or “tenant buyer” schemes could offer a simple solution to this problem. They enable potential buyers to purchase a property by renting it first. A proportion of the monthly rent is used to reduce the final amount owed on the property – allowing the “tenant buyer” to gradually save for a deposit over time. After this period the “tenant” can buy the property using a mortgage at a pre-agreed price.
It’s a similar situation when buying a hire car. You can put down an option to buy that car in three years time, whilst getting to use the car from day one. At the end of the agreed period you can either hand the keys back, or take up the option to purchase it at a pre-agreed price.
The advantage for the buyer is that they can treat the property as their own home from day one, and any value they add to it, they get to keep as the end purchase price is fixed in advance. In addition some of the monthly rent will also be going back into their own pocket – effectively helping them to save the deposit required to buy. This method of purchase is generally far more affordable than the 10%+ deposit (and other fees) that mortgage lenders will ask for.
The benefit for the seller is that they receive a regular rental income and no void periods. Maintenance costs are also reduced as the property is generally well looked after. They also have the security of an option to sell their home, on or before a specific date in the future.
This method of purchasing property has been around for years in the commercial sector, but is a relatively new idea in the residential sector. However, this approach is gradually being seen by landlords and buyers as a win-win situation for both parties – especially when mortgage finance is tight and property sales are slow.
It seems more and more “rent to buy” schemes are being used by potential buyers keen to get on the housing ladder and by sellers keen to ‘sell’ their property without drastically reducing the price. This is a promising development in the residential property market and one that I will watch with interest.
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Your questions answered by specialist property Lettings, Management and Investment agent Richard Pennack. Managing Director of iQ Property ltd based in Hull and Specialists in Residential and light commercial property Lettings, Management and Investments. iQ Property ltd is a member of ARLA and The Property Ombudsman. Call 01482 240148 or email richard@iqpropertyhull.co.uk or visit www.iqpropertyhull.co.uk
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