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‘Rent-To-Buy’ Explained
(aka Rent-To-Own)
Over recent years, especially after the Lending Crisis of late, being accepted for a Mortgage has become increasingly more difficult. This scenario is even more of a challenge for certain people. A Rent-to-Buy property can therefore help the following types of people:
- Individuals with a ‘poor credit history’
- Individuals who are unable to obtain a mortgage for a period of time, due to immigration
laws and therefore have a ‘short credit history’
- First Time Buyers who have been unable to save up a deposit of between 5 – 15%
- Low-income families
Rent-to-Buy is a relatively new approach to getting on the property ladder. It has been hugely popular in the United States for many years and has also been implement successfully in Australia and New Zealand.
Many people feel caught in the trap where they are forever renting and property prices keep increasing, making it a struggle to get on the housing ladder.
This is where Rent-to-Buy can help. First you find a property that is available as a Rent-to-Buy. You then take out a rental contract, normally around 4-5 years, paying a proportion above the market rent (this goes toward your deposit) and then exercise your option to purchase the property at the end of the agreed term.
The advantages are:
- Regular savings toward your deposit
- No mortgage is needed until you buy at the end of the 5 year term
- You can make any improvements on the property, in your own style or taste, and live in it as if you owned it, from day one.
- You get a fixed purchase price option from day 1, thus if in 5 years the property has gone up 10% you have made an instant profit!
- If your circumstances happen to change, you do not have to purchase at the end of the term. You can just move-on at the end of your tenancy term.
- In short, it is guaranteed security and peace of mind. You benefit from renting-out, but also by locking-in any capital growth in the property, whilst saving up your deposit.
JMR Property UK Limited is consistently striving to give our future clients the widest possible choice of homes. As a result of this commitment, we are sourcing as many different types of property in as many different areas as possible.
Please contact us to find out if we have properties in the area of your choice: contact@jmrpropertyuk.com
How It Works
(The Financial Breakdown)
| Property Name: | EXAMPLE |
| Current Market Value |
£95,000 |
| Value taken from recent R.I.C.S. valuations carried out on similar properties in the area. | |
| Agreed Purchase Price | £85,000 |
| You will notice that this figure is £10,000 less than the Market Value of the property. This has been calculated by taking into account our ongoing commitment to provide (where possible) all our Rent-To-Own Properties to our Clients at below the current market value in the area. This is typically between 5% - 15% below. | |
| Property’s Market Value | £115,000 est. |
| in 5 years time (estimated). | |
| Market Rent PCM | £450 pcm |
| Payable per calendar month. This amount must be paid every month and will be subject to the standard Terms and Conditions of a typical Assured Shorthold Tenancy Agreement (AST) in England and Wales. | |
| Monthly Deposit Contribution | £150* |
| The collective sum of all these payments Will go towards you deposit at the end of the 5 year Term. This figure is non-refundable. | x 60 months (5 years) (£1,800 per annum) TOTAL = £9,000 |
| *NB – it must be noted that this figure is set at a minimum £150 and will not be increased by JMR Property UK Limited, over the 5 year term. However, should you wish to increase your payments in order to increase your final deposit figure, this can be arranged accordingly. Please let us know if you are interested in doing this. | |
| Option Premium | £3,500 |
| This acts as your commitment to purchase the Property, and will go towards your Deposit for use when purchasing, at the end of the 5 year Term. This figure is non-refundable. | |
Our service to you is free of charge. However, you will be required to pay the Legal Fees associated with setting up your Rent-to-Buy transaction. This will be a fixed amount from Day One. When it comes to the completion of purchase in 5 years time, we will pay the Legal Costs at this end. The initial legal process typically takes around 28 days, from start to finish. Due to the flexible nature of the Rent-to-Buy, it is possible to structure it to suit your own individual circumstances.