After the double-dip recession several years ago, property prices have since been on the rise. With rental market soaring and buying property in the Capital that is within budget hard to come by, first time buyers are finding it difficult to find and fund their dream of becoming home owners.
It is no surprise that Government’s new Help to Buy scheme has been welcomed with open arms by first time buyers.
Figures show that over 77,000 homes have been bought using the Help to Buy Scheme including over a staggering 41,000 new builds.
Another scheme that helps first time buyers get on the property ladder with small deposit is known as Rent-to-Buy. The scheme allows tenants to rent their home with an option to buy it later at an agreed time for an agreed price. With Rent-to-Buy, tenants no longer pay “dead rent” as part of their rent is credited as down payment for their home.
The financial practicality of this ‘buy-your-own- home’ scheme reduces the immediate burden on the purse strings and allows young professionals and working class people to build up equity in their home while living in it as tenant. This guarantee of eventually establishing a secure foothold on the property ladder without a hefty down payment is for many, the only way out of the renters market and becoming property owners.
Benefits for First Time Buyers
Considering that it’s not easy to scrimp and save for a house deposit, Rent-to-Buy scheme has opened the property market to low income earners and is especially recommended for households and couples with joint income less than £60,000 per annum.
Rent-to-Buy is suitable for legal immigrants who have not been resident in the UK long enough to get a mortgage, self-employed people struggling to get a mortgage and young families with small down payment. Rent-to-Buy option essentially puts otherwise unavailable properties well within reach and offers an affordable opportunity for many to achieve their dream of buying their own home.
Changes in work or personal circumstances do occur and if renters choose not to complete on the purchase of their home, they can sell their right to buy it and if their home has appreciated in value, they could make a profit while taking out their equity. This flexibility offers first time buyers the added luxury of time and opportunity to see if they like an area and can afford the price of living there.
With the average rent in London escalating earlier this year to a massive £1,500 a month, living in a Rent-to-Buy home with a fixed monthly rent and an option to purchase at a later date is definitely the most viable option for people with small down payment who want to buy their own home.
Without the need for a big down payment, Rent-to-Buy, like the Government’s Help to Buy option is a wonderfully practical solution to what previously seemed to be an insurmountable problem. We could be on the road to seeing a new generation of property owners as more people move into Rent-to-Buy homes.
Have you ever used a Rent to Buy scheme? What was your experience like? Let us know!