• Rent-to-buy contracts

  • By Hannah Kane

  • Jon Green, Chief Executive of The Lease Option Company, offers his advice on 'rent-to-buy' contracts

  • What’s the difference between ‘rent-to-buy’ and ‘lease options’?
    ‘A ‘lease option’ is the technical definition for a specialised tenancy agreement allowing the tenant to rent a property for a length of time with the option to buy it outright at the end of the rental period. Lease options are sometimes called ‘rent-to-buy’ schemes for this reason.’

    How does it work?
    ‘Although the jargon can sound confusing, the basic idea behind a lease option is straightforward: the lease option provider will acquire your home for you, either by buying on your behalf or working with other landlords, and allow you to move in as a rent-paying tenant. You’ll then have the option to buy the property outright after a fixed period of time, typically three to five years, at a price agreed when you first moved in. You’re under no obligation to buy at the end of the rental period.’
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    Do I pay a deposit?
    ‘The lease option provider will usually ask for an initial upfront payment for the option. This can be as low as two per cent of the property’s value so it’s much less than most mortgage lenders will require. This payment is knocked off the agreed price for the property.’

    What are the benefits of purchasing property this way?
    ‘For many first time buyers, lease options can offer a much better deal than a conventional purchase. You don’t need to take out a mortgage straight away, giving you time for your financial position to improve so you can afford to buy at the end of the rental period. While that happens, you get to live in a property you can think of as your own home. And you’re on the property ladder with the purchase price locked in from the start, giving you the opportunity to make a capital gain if prices rise sufficiently as well as the protection to avoid most of the financial loss if prices fall.’

    Are there any downsides?
    ‘Taking out a lease option is a major commitment – just like buying a property. You’ll be living in the same place for the agreed rental period, which means that you have to think carefully about your future plans before you sign up.’

    Will the rent be higher than a normal lease?
    ‘The rent you pay with a lease option will be slightly higher than if you were just a tenant. Part of this additional rent is taken as payment for the option to buy along with the amount paid upfront. This total option payment is knocked off the agreed purchase price if you buy. In effect, this means that some of the rent helps you to build a mortgage deposit for the future. If you don’t exercise the option then the cost of higher rental payments is not refundable. However, this is still better than having bought a property which has fallen substantially in value.’

    Is this scheme widely available?
    There are only a small number of lease option providers in the UK at the moment. If you’re based in the London area, contact The Lease Option Company (020 8947 8377/www.theleaseoptioncompany.co.uk).’

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72 comments

  1. Posted by n everette on 04 Jul 2009 18:29

    i am interested in this scheme 3 bedroom in Ashford Middlesex area.

  2. Posted by isaack on 28 Jun 2009 22:00

    Looking for Rent to buy from either private or agents in Coventry. Ideally 3 bed. Binley, Whitley, Willenhall or Walsgrave area.
    Thanks.

  3. Posted by Jo on 27 Jun 2009 23:44

    Hi everyone
    I am looking for a house 2 to 3 bed pref with a garage and or drive, in the Coventry area under the rent to buy option. Can anyone point me in the right direction.
    Regards
    Jo

  4. Posted by dave on 23 Jun 2009 12:06

    hi im looking for a 2-3 bedroomed house with rear grassed garden near sheffield or with in 40 mins travel time im looking for the rent to buy option if any one could help or point me in the right direction that would be great thank you very much

  5. Posted by daniela on 19 Jun 2009 15:01

    i am lookiing for 3 bedroom flat or house rent with option tu buy in Finchley road ,West Hamstead, Golders Green Swiss Cottage.Ideally the propety will have some outside spage eg. balcony or garden and garage.Mi nr. 07551545866.THANKS

  6. Posted by B0ngani on 19 Jun 2009 13:12

    l am looking for a rent o buy house in Leeds.l need a 3 or more bedroom house.My number is 07886725421 or 07878979701

  7. Posted by B0ngani on 19 Jun 2009 13:09

    l am looking for a 3 or more bedroomed house anywhere in Leeds.l need the rent to buy option please. Thank you

  8. Posted by Gary Marsden on 17 Jun 2009 18:17

    I think this is a great way to get on the property ladder, I have been reading up on it at simple2buy.co.uk, hoping to get a place myself as rent to own

  9. Posted by Andy Carva on 14 Jun 2009 18:07

    i am looking for a rent to buy flat, 2 bedroom apartment in Liverpool pref with a garage, close to central. please email me piranha.studio@gmail.com

  10. Posted by emma loudon on 10 Jun 2009 21:10

    i am looking for a rent to buy home, 4 bedroom property pref with a garage, close to local amminities. am looking for any in wigton, cockermouth, maryport, cumbria. please email me

  11. Posted by Roy San Juan on 09 Jun 2009 23:29

    Hi
    Looking for a rent to buy in the Luton area (LU1)
    3 / 4 Bedroom house.
    Please contact me i
    thanks

  12. Posted by Heather on 03 Jun 2009 13:29

    Hi we are looking for a buy to rent house in the Lancashire area, preferably Accrington where out child goes to School. Can anybody help please

  13. Posted by Mikica on 24 May 2009 20:23

    I forgot to say that the house in Gateshead is available for rent to buy option. It is brand new and ready to move into. Serious buyers only

  14. Posted by pam on 24 May 2009 20:18

    please looking rent option to buy in london area
    2 or 3 bedroom
    email me details
    serious people only

  15. Posted by Mikica on 19 May 2009 22:53

    I have 3 bed new build house in Gateshead with gardens and driveway. Carpeted throughout. Please call 07740093463 if interested

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