How Does the Rent to Buy Scheme Work?

Written by Martha Lott Reviewed by Graham Norwood

10th Mar 2020 (Last updated on 11th Apr 2024) 9 minute read

What is the Rent to Buy Scheme?

The Rent to Buy scheme in England, Scotland and Northern Ireland allows you to rent a new build home for 20% less than the market rate rent price. Also known as Rent to Save, Intermediate Rent and Rent to Own in Wales, the Rent to Buy scheme will give you the opportunity to save for a house deposit whilst renting at a subsidised price.

The tenancy will be a shorthand ranging from 6 months to 5 years; 6 month or 12 month tenancies are usually renewable - they can be ‘rolled over’ or extended without you having to move out. During this period, it is hoped the renter will be able to save for a deposit on that or a similar property, although there is no obligation to buy the house once the lease is up.

After the rent period has ended, you’ll have the chance to purchase the house outright. If this isn’t a realistic option for your budget, you can enter a Shared Ownership scheme which will allow you to buy a share of the house whilst renting the remainder. The shares in question are usually 5% segments, starting at 25% - so you could buy 25%, 30%, 35% or 40%, for example.

Rent to Buy is not available on all property types as the landlord of the property must be signed up to the scheme. You don’t have to pay a deposit to secure the property, but the first month’s rent will be needed in advance, similar to a typical renting contract.

As the properties available in the Rent to Buy scheme are new build homes, you should get a snagging list to ensure there are no issues.

How Does Rent to Own Work in Wales?

The Rent to Own-Wales scheme is now closed to participating landlords and no new schemes will be funded. However, some properties under the scheme are still being built, so might be available to new applicants. For further information, check the Welsh Government website here.

In Wales, Rent to Buy is referred to as Rent to Own. It essentially works the same as Rent to Buy but differs slightly with how you save the money. The scheme works by paying rent on a property at the going market rate, for up to 5 years, with the option to buy the house after 2 years.

If you choose to buy the property you’ve been renting, you’ll receive 50% of any increase to the property’s value along with 25% of the rent you’ve paid. This must be used towards your deposit for the house.

Am I Eligible for Rent to Buy?

To be eligible for the Rent to Buy scheme, you must meet the following criteria;

• You must be a first time buyer
• You must be earning less than £60,000 in one household
• In London, you must have a combined household income of less than £64,300
• You should also have a good credit score to be eligible to apply for the Rent to Buy scheme
• Your location will also depend on your eligibility, find out from your local Help to Buy agent what you need to do to qualify for the scheme.

As the Rent to Buy scheme is designed for those with lower incomes, many lenders only accept applications from those with a good credit score as having a bad credit score will be viewed as too much of a risk for the lender.

The eligibility criteria also depends on the housing association the property is being sold through. This could mean that certain groups of people, such as housing association tenants and council tenants, may be given priority.

The Rent to Own scheme in Wales has similar eligibility criteria as the Rent to Buy scheme. To qualify for Rent to Own you must:

• be British or an EU/EEA citizen
• have a combined household income of £60,000 or less each year
• currently be in work or self-employed
• not be eligible for housing benefit
• be able to afford the rent
• not currently own a home (unless a court order forces you to remain on the deeds of a property where your children live)
• rent an eligible home from a participating landlord
• be unable to afford to buy a property through the open market or other initiatives

How to Apply for Rent to Buy

Depending on where you live, the application process for Rent to Buy scheme will differ. If you live in England, you will need to find your local Help to Buy agent to apply for the scheme. You will be added to the waiting list and contacted when a suitable property is available.

In Wales, the scheme has closed. Some properties that are still being built might be taking applicants but you should contact participating landlords to apply for the Rent to Own scheme. They will let you know of any available and suitable properties for your requirements. After applying, you need to make sure you have £250 to pay the rent deposit.

To apply for the Rent to Buy scheme in Northern Ireland, you should apply via the Co-Ownership website.

Finding Rent to Buy Properties

Finding Rent to Buy properties can be very difficult and it often varies depending on where you live in the UK. It is also referred to by a number of different names which can make it difficult to find. These names include:

• Try Before You Buy
• Rent Save Buy
• Rent to Own
• Intermediate Market Rent

If you can't find appropriate Rent to Buy properties near where you'd like to live, try neighbouring areas instead. Some buyers find it's worth moving slightly out of the area they originally wanted as it ensures they can benefit from the savings that come with the Rent to Buy scheme.

The best way to start searching for these types of properties is to register with a Help to Buy agent. These agents will be the most helpful professionals when it comes to finding Rent to Buy properties.

Is Rent to Buy Right For Me?

If you’re struggling to save any money to go towards your first home while you rent, then Rent to Buy will be a useful scheme for you. Not only does it allow you to save money towards a house deposit by paying a cheaper market rate of rent, but you’ll also have access to properties that would normally be too expensive for your budget.

The Rent to Own scheme in Wales is worth it if you plan to eventually buy the property after you rent it. Whilst the rent is the same as the market rate, you will get back 25% of the rent you’ve already paid to go towards your house deposit.

Remember, when you’re buying your first home, you will need a conveyancer to help you with the legal process, as well as a property surveyor to check the property’s condition - and yes, this does apply even to a new-build home which in theory should be in excellent condition.

Shared Ownership and Rent to Buy

Many Rent to Buy schemes offer the chance to buy a share of your home after renting for a period of time. Commonly known as Shared Ownership, it’s a government scheme that allows you to buy a portion of your house whilst paying rent on the rest. It gives you the option to buy more of the property later down the line.

The minimum portion of the house you can buy starts at 25%, with the maximum share you can buy being 75%. You’ll need to take out a mortgage for your share, with the opportunity to pay a mortgage deposit as little as 5%.

We have an article discussing shared ownership solicitor fees in detail. We cover the conveyancing costs associated with this and the process that needs to be followed.

When you know the area where you are going to buy, check with local developers and estate agents - sometimes it has been difficult to re-sell shared ownership properties, so consider the long-term as well as your short-term needs.

Shared Ownership mustn't be mistaken for Shared Equity, however. If you would like to learn more about Shared Ownership and Shared Equity, especially the differences between the two, then you can read our article specifically debating the two schemes.

What is London Living Rent?

London Living Rent is similar to Rent to Buy but it helps those living in London to transition from renting to their first home. Introduced in 2017 under the mayor of London’s Affordable Homes Programme, London Living Rent is part of a £1.7bn investment into affordable properties all across London.

Those looking to apply for the scheme must have a combined household income of £60,000 or less and must be unable to currently afford to buy a house in their local area, including through a Shared Ownership scheme.

London Living Rent properties have a minimum tenancy of 3 years and are scheduled to be available to rent from 2021/2022.

Rent to Buy Mortgage

Many mortgage providers will offer mortgages for Rent to Buy or Shared Ownership properties. You should consider whether you need a mortgage broker to discuss the options available to you. By letting them know the details of your situation, they will be able to advise you, as Rent to Buy mortgages are in less demand than a traditional mortgage.

It’s important that you make sure you can afford to get a mortgage, as there are other costs involved in buying a house that’ll you need to factor in, too. You’ll need to budget conveyancing costs, surveying fees, removal costs and mortgage fees.

Other Ways to Buy Your First House

If you aren't eligible for the Rent to Buy scheme or are unsure if it's the right scheme for you, then there are other ways to buy a house that you could consider. Other government schemes worth researching include:

1. Help to Buy Equity Loan - This is closed in England but has been extended until March 2025 in Wales. This shared equity scheme allows first-time buyers to purchase a new-build house using a small deposit (usually around 5%), where they can then take out an equity loan for a proportion of the property’s value (usually 20%) and also a mortgage for the rest of the purchase price.
2. Right to Buy - Right to Buy allows council tenants to buy their home for a discounted price. This discounted amount is usually up to £80,900 or £108,000 in London.
3. Shared Ownership - The Help to Buy: Shared Ownership scheme allows first-time buyers or families with lower income to purchase a share of their home, whilst paying a discounted rate rent on the remaining share.

Learn More About Renting

This has been part of our renting guide. In the next article, we will give advice for the sale of help to buy properties. To learn more, read selling a help to buy property.