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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101 comments
Hi I am looking for a 2 bed flat with seperate lounge and kitchen and bathroom in the Bristol area.
Hi,
I have a great 4 bedroom house, with a long garden in Crediton, near Exeter, available as a Rent to Buy. The interior has all just been redone in neutral colours, so it's a blank canvas for you to add your own taste!
Please call me for more info on 07545 975458.
Thanks,
Debbie
hi iam looking for a 2 bed property to rent to buy in the e11 area.
Hi i am looking for A rent to buy in north london .preferably crouch end muswell hill highgate areas .although i would consider other areas
I am looking for a rent to buy property 4-5 bed detached in nottingham area, close to junc 25 off the M1.
HI,
I am looking for a house to rent with a view to buy preferably 3/4 bedrooms in the North East TS area to live my my family.Thank you
A nice 3 bed inner terrace house with gch and dg. recently refurbished for a RENT to BUY tenant. Located close to the town centre of Barnsley, South Yorkshire, in a quiet cul-de-sac. just 1½ miles from M1 J37. Phone 07092 145954 for full details.
Hi all,
I've got a lovely 2 BEDROOM Maisonette in Belvedere for Sale on a Rent-To-Buy basis. Very spacious rooms, kitchen and living space. Has own garage en bloc, beautiful communal garden and within walking distance of the train station.
Property is perfect for a young family. Ideal for people looking to get on the property ladder even with a deposit as small as £6k and can afford monthly payments of about £950.
Property immediately available so please call Olu if interested on 078 726 06646
Hi,
I am looking for a rent to buy 3/4 bedroom house, with a garden, a garage (not essential), close to local ammenities, parking, spacious rooms in the South London area. Preferably Sydenham, Brockley or Forest Hill.
Please email me. Thanks.
I have a 4 bedroom house in Farnborough, Hampshire available as a Rent to Buy.
If you would like more details, please call me on 0800 634 7022 (free call).
Thanks
Hi
Looking for rent to buy Glasgow and surrounding areas anything considered
Sean Clancy
Looking for a Rent o Buy House in South East London preferrably Abbeywood, Belvedere, Welling, Erith and surrounding area. Please contact me on 0787 260 6646.
Thanks
Hi all,
I am also looking for a 3 bed room house to rent and buy later. Pls contact me on 07930442232. area, Abbeywood se2 or surroundin area
i am also looking for a house to rent then own.
three rooms and two bathrooms with a unfenished basement.
Want to turn the basement into my own apartment.
thank you for listening
Marjorie
i am interested in this scheme 3 bedroom in Ashford Middlesex area.