Rent to buy....what's the deal? Is it a con?

sirhc_2

..............

Fire_Fox

How much money have you spent on renting since June 2007 over and above an imaginary mortgage? How much money would you have LOST on the housing market if you'd purchased your starter home in June 2007? :rolleyes: Of course all your friends are telling you being a homeowner is fantastic, they aren't going to admit they are in hock up to their eyeballs and negative equity to boot!!

If you can't afford to save a decent deposit you can't afford to be a homeowner, they are expensive to repair and maintain. Both get second jobs, move back in with your parents for a while, rent a flat instead of a house, cut back on all non-essential outgoings (Sky/ Wii/ car/ takeaways/ new clothes/ social life), spend all your spare time on MSE. :money:

CloudCuckooLand

Are you out of debt management?

It will affect your qualifying criteria.

CloudCuckooLand

sirhc wrote: »

Can I switch gas and elec if i'm in debt managment

I've recently got behind with my gas and electric (I buy both of these through utility warehouse) and have been refered to a debt collection agency. I've spoken to the agency today and sorted out a payment plan. They have informed me that all future billing will go directly through them until I'm back up to date with all payments. I've recently done a price comparison and could save £130 per month if I switch suppliers but I'm not sure whether thats possible anymore because I'm now dealing with the agency. My other fear is that if I switch, will the agency demand the full amount?
The agency is utility debt collectors ltd.

Help

You should check your credit history, and clear any outstanding defaults 3 months before making an application.

http://www.direct.gov.uk/en/HomeAndCommunity/BuyingAndSellingYourHome/HomeBuyingSchemes/DG_170934


Its tricky this google lark...not.

jassco

In defence of FireFox, she's right. If you can't afford to save any money whilst paying rent, then how are you going to pay your mortgage when interest rates start to rise heavily, your roof needs repairing and your boiler breaks all at the same time?

adg1

The rent to buy scheme, as far as I'm aware, allows you to buy a percentage of the property with the rest still owned by the developer. You 'buy' somewhere between 25 and 75%, then pay rent on the rest to the developer/housing association. The Housing Association sets the rent at about 2/3% of the rest of the property value per annum.

You end up paying for a mortgage that is based on a vlaue less than the property, hence more affordable, and a discounted rent on the other bit you don't own. This should enable you to save for the rest of the house though both added up probably won't leave you huge amounts left over to save.

You need to cover the normal pre-purchase thingslike surveys/solicitors/stamp duty etc. After your 'tenancy' ends, you see if you can then get a mortgage extension to buy the rest or use savings you have built up. Over time, you increase your share up to 100%.

For the initial term, you are a tenant and not the homeowner hence there are limitations on your use of the property.

If you can't get a mortgage to buy the rest of the property I believe you can either stay on as a tenant paying as you were, or you sell up at the current market value - you get the percentage of what you own and the developer the rest. If you can't get a mortgage or afford the rest of the house I believe the developer may though force a sale through meaning you lose your home, save the money from it, and are back at the start again.

Most will have a catch that in that you have to use the developers mortgage advisor and their package which isn't always the best rate.

I understand your position of wanting to buy and viewing renting as dead money, but not everyone can afford to buy. I am a firm believer in being able to afford to buy, rather than having it laid on a plate. I'd love to buy a house but simply can't save for a deposit. I also know that there are other costs associated with home-ownership which I wouldn't be able to afford if I was mortgaged to the hilt and barely able to survive on what I have left each month.

Owning a home if a priviledge and not a right as so many people seem to think these days. In fact, I believe there was a thread on this forum about a teacher who thought be was, basically, being given a house by the developer but didn't read the small print. I'm sure someone will post a link to it soon as it makes very good reading for people considering this type of scheme.

PasturesNew

There are many "rent to own" style schemes. Each will be different. Which area are you in? Whose rent to own properties have you seen? Can you provide a "for instance" link?

knightstyle

There is also a scheme run by some developers, Gleeson for example where you buy the property now and the builder effectively lends you 25% of the price as an interest free loan. Plus consider the shared ownership scheme.
Both these schemes are for new properties which should have low running costs and no repairs for several years.
The other posters were right to warn you about the consequences of a hike in interest rates and a drop in house values, we lost £30k in three months when we bought in 1988!

BexInLondon

Rent to buy round here is linked to Shared Ownership, but isn't the same thing. Essentially you rent the property for up to 5 years at a rent of 80% typical market rate (and from what I've seen, this is true - £800 for a two-bed flat in zone 2 is cheap!). During this period, the idea is that you're saving like mad, so that at the end of the period, or sooner if possible, you can enter into normal shared ownership, which is what I believe adg1 is describing. Some schemes have incentives ranging from white goods to having a year's rent refunded if you buy in the first 3 years (so a tidy £5k towards deposit).

As I said, that's just around here, and they seem to be in shorter supply now as there were lots more good deals around back in March. Schemes might be different elsewhere, but I think people are confusing it with Shared Ownership, which it isn't!

Fire_Fox

sirhc wrote: »

Firefox
I am aware of how the housing market has been over the last few years but I have asked for advice on the rent to own scheme, not to be patronised like a teenager who doesn't have a clue about the world. Our finances and our circumstances are well managed, thankyou, but buying a house isn't how it was 20 years ago. We are under the impression that this scheme is government-backed with the intention of helping first-time buyers, but there is little info that we have managed to find. We would love to hear from anyone who can give us constructive advice, not tell us that we're living beyond our means and therefore unfit to be homeowners.

You said renting is dead money which is a fallacy. In no way did I suggest you were living beyond your means, I suggested you cut back on luxuries (be honest, we all have them) in order to achieve your goal of a decent deposit. Just because you don't like my advice doesn't mean it isn't constructive.

sirhc_2

Thanks to everyone for their advice and critcism alike, we have a little more to go on now.
Best wishes for the season.