Rent-to-buy contracts
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By Hannah Kane
Posted: Thu Aug 23 2007 -
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.’
Feature continuesAdvertisementDo 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).’- Add your comment to this feature
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116 comments
I AM LOOKING FOR A 2 BEDROOM FLAT IN NORTH WEST LONDON: HENDON, COLINDALE EDGWARE OR HARROW . MY CONTACT NUMBER IS 07786362455
Looking for 3 br flat or house in Hackney area. Can afford £1300 per month
Hi all, you may want to check out Tenant2Owner for further information on rent to buy. Google them for the website
hello can u tell me the cheapest house or studio flat in london on rent to buy bases plz email me or contact me at 00923122291784
I am looking for a 2 bedroom place in the dartford/gravesend area, may need DSS help price range upto £750 a month. please call simon on 07717495050
Hi I am looking for a 2 bed in south london on rent-buy contract plz contact on 07940100122
Hi i am looking for A rent to buy in north london .preferably muswell hill , ast finchley areas .although i would consider other areas near by.
Hi, i am looking at the option rent to buy in north london, 3-4 bedroom house. You can contact me on my mobile 0861498398 my anme is andrei.
I am looking for a Three bedroom house in sw London ie Wimbledon, Wandsworth, Raynes Park, Kingston-upon-Thames, and New Malden. I would consider any other surrounding areas on the rent-to-buy contracts.
Hello,
I am looking for a spacious 2 bedroom flat on a rent-to-buy basis in Mayfair W1, Chelsea SW3, or South Kensington SW7. Property type - any. Must be near to tube station.
Please call me on 07767 685 867.
We have a 2-double bedroom apartment with balcony, 24-hr concierge and gym for sale on a Rent to Buy basis.
The address of the property is:
Landmark Heights
Daubeney Road
Hackney
London E5 0EW
The apartment has spectacular iews of London.
2-double bedrooms ( bed 1 - 13'08 x 9'03 . Bed 2 - 13'08 x 8'03)
Living room (15'05 x 12'06)
Balcony
Fitted kitchen (12'05 x 7'11)
Bathroom (with bath)
Lots of storage in hallway which includes a utility cupboard
Separate WC
Double glazed
Gas centrally heated
Communal Gardens
Gated premises
24-hr Concierge
Lease 117 remaining
Ground rent - £150 pa
Service charge - £2630 pa
Bus 242 stop is right outside the building (also a night bus) Homerton Hospital to Tottenham Court Road.
Nearest tube station - Bethnal Green (on the central line)
Nearest BR stations - Homerton BR & Clapton BR
Nearest Shopping - Chatsworth Road E5 (walking distance)
Nearest supermarket shopping - Morning Lane & Mare Street (24-hr Tesco, M&S, Iceland etc). Lots of amenities in Hackney Central including the Hackney Empire Theatre..
Homerton Hospital - Walking distance
Doctors Surgery - Located on Homerton High Street - walking distance
Price £175,000
Rent to Buy Option for 36 months
Payment towards the Deposit on signing the Option, then the deposit to be paid towards on a monthly basis.
Flexible terms to be mutually agreed.
Further enquiries, please do not hesitate to contact me on 07932 682 294.
Hello, I have a 2-double bedroom apartment on 19th floor of private, concierge building with gym. We would llike to offer at £175k on Rent to Buy basis.
The address of the property is:
Landmark Heights
Daubeney Road
Hackney
London E5 0EW
The apartment is located on the 19th floor and has spectacular views of London.
2-double bedrooms ( bed 1 - 13'08 x 9'03 . Bed 2 - 13'08 x 8'03)
Living room (15'05 x 12'06)
Balcony
Fitted kitchen (12'05 x 7'11)
Bathroom (with bath)
Lots of storage in hallway which includes a utility cupboard
Separate WC
Double glazed
Gas centrally heated
Communal Gardens
Gated premises
24-hr Concierge
Lease 117 remaining
Ground rent - £150 pa
Service charge - £2630 pa
Bus 242 stop is right outside the building (also a night bus) Homerton Hospital to Tottenham Court Road.
Nearest tube station - Bethnal Green (on the central line)
Nearest BR stations - Homerton BR & Clapton BR
Nearest Shopping - Chatsworth Road E5 (walking distance)
Nearest supermarket shopping - Morning Lane & Mare Street (24-hr Tesco, M&S, Iceland etc). Lots of amenities in Hackney Central including the Hackney Empire Theatre..
Homerton Hospital - Walking distance
Doctors Surgery - Located on Homerton High Street - walking distance
Price £175,000
Rent to Buy Option for 36 months
Payment towards the Deposit on signing the Option, then the deposit to be paid towards on a monthly basis.
Flexible terms to be mutually agreed.
Further enquiries, please do not hesitate to contact me on 07932 682 294.
Hello, I have a 2-double bedroom apartment on 19th floor of private, concierge building with gym. We would llike to offer at £175k on Rent to Buy basis. Flexible terms to be agreed. My number is 07932682294. Thanks.
Hi. I am looking for a 3 or 4 bed house in south east London, to rent to buy. Max £1000 per month.
Hi again I'm still looking for a rent to buy property in the West lLndon area, prefably a 1 bed. I am on a budget of £700pcm and would prefer Acton W3. Please call me on 07505 888 468.