Press Release - How Does Rent To Buy Work?

Copyright © Ed Francis First Time Buyer Network
For the most people these days the thought of owning their own home is a distant reality. Lenders asking for ever increasing deposits and entry level homes at ridiculously high prices even in spite of the credit crunch.

So how can a professional couple or single person with a reasonable income get on to the property ladder when many lenders now are unwilling or unable to provide a mortgage? How does someone with a short period of residency or poor credit history but a high income achieve the dream of home ownership?

It seems that for many the answer lies in renting to own. This concept is no real revelation having been practised in America and Canada for years and merely seen as another method of home ownership. However, renting to own is quickly taking hold in the United Kingdom.

At the most fundamental level renting to own simply involves a seller willing to sell and a tenant willing to buy. Using an option agreement, the tenant/buyer can exercise their option to buy a property after a specified period. Instead of paying a 10% - 20% deposit, the buyer only has to put down between 2% - 5%. The contracts can span a period from as short as six months up to 25 years or more.

The purchase price is fixed - even if the buyer does not exercise their option to buy for five years. Rent is usually paid at the market value however an additional amount is paid towards the deposit. This means that a first time buyer has the opportunity to buy a property of their choice, with minimal deposit whilst accruing equity over the rent to own period. The scheme is ideal for those with a small deposit and great for those with impaired credit.

The only real restriction is how flexible each party is prepared to be. The concept is appealing to many first time buyers as it gives them stability not afforded through renting and a chance to acquire real equity even in a falling market. Another advantage is the fact that the buyer will not be subject to fluctuating interest rates.

Rent to own allows the tenant/buyer to test drive the property before committing to buy at the end of the term. If the buyer chooses not to go ahead with the purchase, the vendor usually retains the deposit.

With growing discontent among first time buyers and the lack of government assistance it appears that renting to own is set to be the biggest growth sector in the UK housing market for the next few years.
Copyright © First Time Buyer Network