The End Of The Elusive Property Purchase
In a recent YouGov survey, commissioned by the National Housing Federation
, it was revealed that more than half of 18 to 30 year olds living in London believe that it will be more than a decade until they are in a financial position to purchase their first home. Furthermore, in some areas, average house prices had grown to over fifteen times the average wage, forcing young people to search for homes in cheaper areas away from their families and places of employment.
This is not a phenomenon unique to the capital. Throughout the country, young families are experiencing difficulties raising both the deposits and the finance required to purchase their first property. The desire to own a home rather than rent remains strong despite the sacrifices required - yet it is a common occurrence that young potential homebuyers will have diligently saved for a deposit over a number of years, only to find that property prices have increased and a larger deposit is required. Rent to buy schemes are an ideal solution in an environment where house prices always seem to be just beyond what is attainable.
Under a rent to buy program, potential homeowners looking to take their first steps up the housing ladder, rent a property which includes an option to purchase within the tenancy period. This agreement may be for one or two years - or considerably longer - however the major benefit of the 'option to purchase' clause is that the price of the property is fixed in advance. Therefore, should the tenants choose to exercise their option, they know exactly how much money they will have had to save for the deposit, and been able to budget over a pre-determined period of time. Some schemes even include the facility whereby the amount of the deposit is reduced by the amount of rent (or a percentage of it) paid during the tenancy agreement effectively helping first time homebuyers to pay as they go.
There are further considerable advantages to owning a property under a rent to buy scheme:-
* It allows people time to repair damaged credit scores before applying for a mortgage.
* It is ideal for young people or those new to the UK who do not yet have a credit score.
* If the value of the property increases above the pre-agreed price, the additional equity belongs to the tenants.
* If the circumstances of the tenants change and the house is no longer affordable, they may continue to rent or walk away from the property.
However, the ultimate benefit of rent to buy schemes for all first time homebuyers is that they know from day one the price is of their chosen property, how much deposit is going to be required and how long they have to save for it. No more putting money aside for years to discover their deposit is insufficient to fund the elusive property purchase.
by: Oliver Darraugh
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