Renting to own – a way to realise the dream of home ownership

Posted under Advice by Jermaine

Many people who had been dreaming of owning a home could not convert it in to reality. Demands of high deposits from lenders, high entry level prices in spite of credit crunch discouraged attempts for buying home.

A professional couple or an individual may be finding it difficult to get on to the property ladder since lenders are unable to provide mortgage on affordable terms. The question arises as to how someone with poor credit history or short residency period can realise the dream of owning a home?

There is a way out; in the renting to own approach, which is now taking hold in the UK.

Renting to own, fundamentally involves a seller, and a tenant willing to buy. By signing an option agreement, a tenant or a buyer can purchase a property after a specified period by exercising the option in the agreement. The tenant or the buyer has to pay up to 5% instead of 15% to 20% deposit for a contract for six months or up to 20 years and more.

The purchase price is mentioned in the beginning of agreement even if the option to buy is not exercised for 5 years. The rent is charged at the market rate along with an additional amount towards deposit, meaning that first time buyer could buy a property with minimal deposit and simultaneously accrue equity over the rent.

The only limitation in this rent to buy approach is the extent of flexibility which the seller and tenant are prepared to exercise. With theses set of advantages, renting to own is poised to flourish in the next few years in the UK housing market.

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