Rent to Own for Tenants
Rent to Own is an innovative strategy allowing tenants to get onto the property ladder. Rent to Own allows tenants to rent their desired property for a fixed period of time (commonly 5 years), at a fixed monthly rent, with the option to purchase the property at a pre-agreed price at the end of the option period.
Common Problems Faced By Buyers
- Have you previously been refused a loan or mortgage?
- Do you currently have a poor credit rating?
- Do you have a CCJ or default on your credit file?
- Are you self-employed but don’t yet have sufficient accounts?
- Are you wanting to buy but don’t yet have a large enough deposit saved up?
If you answered yes to any of the above questions,Rent to Own might be suitable for you.
Download Tenant Brochure
Frequently asked questions
Who can use Rent to Own?
>Rent to Own is available to everyone, but is best suited to people with poor credit ratings, self-employed people, and those with little or no deposit saved up. The Rent to Own strategy is developed to help you save towards your deposit, whilst making monthly rental payments.
All Tenant Buyers are subject to a financial health check when they apply, however don’t let this worry you, even those with CCJs may still be suitable for Rent to Own. After all, that’s why Rent to Own was developed, to help people get onto the property ladder.
Who is Rent to Own not suitable for?
>Rent to Own is not suitable for those who have no real prospect of affording future mortgage payments,those whose employment status may be at risk in the near future, those in receipt of housing benefit, or anyone who is currently bankrupt.
After the financial health check, carried out by an independentthird-party agent, we can let you know whether you meet the criteria for your desired properties.
If you have any questions, or if you are unsure whether you can afford Rent to Own, please get in touch to discuss your circumstances with a member of our team.
What will it cost me?
>Once approved, Tenant Buyers pay a non-refundable option arrangement fee of £1,500. Tenant Buyers then pay their rent as normal every month, along with a pre-calculated ‘top up’.
The top up is held in a secure account and at the end of the option period the top up is used as the Tenant Buyer’s deposit.
Will the rent, top up, or the future purchase price ever change?
>No. Your rent will never increase during the life of the option.
The agreed future purchaseprice and the monthly top up are also fixed for the duration of the option agreement.
Will I own the house with Rent to Own?
>After the option period, you will have the option to purchase the property at a pre-agreed price, using the total top up payments as your deposit.
The top up payments are pre- calculated so that at the end of the option period, your total top up will equate to no more than 10% of the agreed future purchase price. At this point, we will introduce you to our approved mortgage brokers who will helpyou find a suitable mortgage.
How long will it take to buy the house?
>Option periods commonly last 5 years. This gives Tenant Buyers a realistic time period to accumulate a large enough deposit through the top up payments.
From starting the Rent to Own process, you could own your home in a minimum of 5 years. In some circumstances, Tenant Buyers may choose to exercise the option early.
Can I get my money back?
>Unless very limited criteria are met, you will lose the accumulated top up if you do not follow through with the option to purchase the house.
If the landlord pulls out of the transaction, you will always receive the top up payments back.
If you are unsure of any of the Rent to Own terms, we are happy to answer any questions you may have. If you are still unsure whether Rent to Own is for you, we recommend that you seek independent financial and/or legal advice before proceeding with your application.
Worked Examples
Examples of existing Rent to Own properties
2 bed mid terrace
Property type
£96,000
Agreed future purchase price
5 years
Option term
£475
Monthly rent
£160(£9,600 after 60 monthly payments)
Monthly top up
The Tenant Buyers are four years and six months into their option period as of June 2018. The Tenant Buyers have zero arrears on the rent and the top up. They have decorated every room in the property and have laid new carpets downstairs. The Tenant Buyers are a young couple with one child who wanted to get on the property ladder. The husband had a good job working for the local authority but had a poor credit rating from a missed phone bill three years ago. The Tenant Buyer’s struggled to get a mortgage due to the husband’s poor credit rating and only had £4,000 in savings. Although the Tenant Buyers could have borrowed from their parents, the real issue was the low credit score.
Rent to Own has helped the young couple move into a property that they would have otherwise never had the opportunity to own.
Demand for this property was extremely high, with twelve couples applying and making offers for it and many other viewings taking place.
3 bed semi detached
Property type
£108,000
Agreed future purchase price
6 years
Option term
£525
Monthly rent
£150(£10,800 after 72 monthly payments)
Monthly top up
The Tenant Buyers have lived in the property for four years and have no rent arrears or top up arrears.
One of the Tenant Buyers had a poor credit rating stemming from the breakdown of a previous marriage. The Tenant Buyer’s partner also had a County Court Judgement obtained against her two years ago. The couple were therefore not very attractive to mortgage lenders and had very little opportunity of home ownership.
Having applied via Rent to Own and chosen their desired property, the couple opted for a six-year option period to allow sufficient time for the County Court Judgement to be removed from the Tenant Buyer’s record. The Tenant Buyers also wanted an extra twelve months to accumulate top up payments towards their deposit. Inthis instance the landlord was happy to oblige the Tenant Buyers’requests and is due to benefit from an increase in the price of his property compounded at 4% per annum over a six year period, an increase in capital of approximately 26.5%.
3 bedroom detached
Property type
£120,000
Agreed future purchase price
5 years
Option term
£550
Monthly rent
£200(£12,000 after 60 monthly payments)
Monthly top up
The Tenant Buyers moved into the property two years ago and have no rental arrears or top up arrears, making both payments on time every month.The Tenant Buyers have installed new windows throughout along with wallpapering and painting the property throughout.
The young couple with two small children wanted to get on the property ladder but due to a County Court Judgment obtained against the husband five years ago, the couple found it almost impossible to obtain a mortgage.
The Tenant Buyers have substantially improved the property and as a result of increased personal savings, the Tenant Buyers have expressed an interest in exercising their option to purchase the property early.
We are in negotiation with the landlord on behalf on the Tenant Buyers to determine if an early exercise of the option can take place.
Contact us
If you would like more information on Rent to Own, please complete the form below and a member of the team will be in touch. Alternatively, you can contact us by telephone on 0191 527 4007.
Rent to Own has helped me become a home owner. That is position I never thought I would be in 5 years ago.
Anonymous - Proud home owner