Rent to Buy – Frequently asked questions.
What is Rent to Buy?
Rent to Buy properties are new-build homes that are available to rent initially. The rent you pay is approximately 20% cheaper than the market rent paid on similar properties in the area. The discounted rent aims to help you save for a deposit over a maximum of five years. You can then buy the property outright after five years if you can afford to. Alternatively, you can apply to buy the property through shared ownership before the five-year period has ended.
What are the benefits of Rent to Buy?
Rent to Buy increases your opportunity to get onto the property ladder while providing stability through a five-year tenancy. The Rent to Buy scheme may give you access to properties that you otherwise wouldn’t be able to afford. Renting is through a reputable landlord, which may offer an extra feeling of security.
How long can I rent my home for?
Keelman Homes will let the property on a one-year renewable fixed-term assured shorthold tenancy, normally up to a maximum of five years. In exceptional cases, we may renew after that period (for example, where a tenant is clearly making efforts to save for a deposit but needs another year or two to save enough).
Am I eligible for Rent to Buy?
To qualify, you must:
• be a working household, earning less than £80,000 per year, intending to
buy your own home at the start of the letting period
• be a first-time buyer or returning to the market following a relationship
breakdown.
• be a UK citizen or have the right to remain in the UK
• have a good credit history without any outstanding credit issues (eg
unsatisfied defaults or county court judgements)
• be able to provide evidence that you’re keen to save towards a deposit with a view to buying your own home
When you apply, you will be assessed against your ability to buy rather than your housing need.
How much will the rent be?
Monthly rents will not exceed 80% of the current market rent (including service charges). The expectation is that this period of reduced rent gives you the chance to save for a cash deposit.
There will be an annual rent increase. The maximum it will be is consumer price index (CPI) plus 1% in April each year, subject to any changes to the Government’s Rent Standard. The CPI will be taken as at September of the previous year.
You will be expected to pay your rent in advance by Direct Debit and maintain regular payments during your tenancy.
Do I need a deposit?
A deposit equating to one month’s rent plus £200 will be required at the start of the tenancy. This deposit will be held by Keelman Homes in an approved deposit protection scheme and will be returned upon purchase of the property or termination of the tenancy. All payments must be cleared funds. Personal cheques will not be accepted.
When can I buy the property?
At the end of your five-year tenancy you can buy the property outright. Keelman Homes will review the progress on your savings each year, when reviewing the fixed-term tenancy, to encourage you to get ready to buy at the earliest opportunity.
When you are ready to buy your home, you will need to obtain a conventional mortgage to do so. No additional affordability assessment, apart from that of the mortgage lender, is required for Rent to Buy purchases. Keelman Homes will get an independent valuation of the property from a RICS valuer, who will set the price the property will be sold at.
You can choose to buy your property during your five-year tenancy under the shared ownership scheme. You must get a mortgage for the percentage of the property you are eligible to own and pay rent on the portion Keelman Homes still owns. You can “staircase” to 100% ownership within the five-year period. You cannot, however, buy outright all at once.
Under the shared ownership scheme an initial purchase of 25% equity should be the minimum first milestone. The property will be sold at market value (or the relevant proportion of value in the case of shared ownership) at the time you buy each staircase portion or when you buy it outright at the end of the five-year period.
What will happen if I can’t afford to buy the property after five years?
If you are unable to afford to buy outright or on a shared ownership basis, you may be asked to leave the property and formal notice may be served.
If there are extenuating circumstance it may be possible for you to remain in the property as a tenant if you are not able to afford to buy it either outright or through shared ownership. The options available to you after this time will be discussed with you at least three months before the end of your tenancy agreement.
Can I leave the property within five years without buying it?
If you are unable to buy and want to vacate the property, we will agree an end date and agree a pre-termination visit. During the visit, we will inspect the property, comparing it with the inventory taken at the start of the tenancy. This will determine whether we return the full deposit or if we need to make deductions for damage or deterioration in the condition of the property.
What will happen if I have bought a share of the property but want to leave?
When you buy a share of the property you become a leaseholder not a tenant. Generally, the terms of the lease will give Keelman Homes the right to a nomination period in which we can help you find a suitable buyer for your home. If Keelman Homes is unable to identify an applicant within the nomination period as defined in the lease, you will then be given permission to market your share for sale through an estate agent.
What happens if I don’t pay my rent or mortgage?
Your home could be repossessed by either Keelman Homes or your mortgage company.
What running costs should I expect to pay after I buy either through Shared Ownership or Rent to Buy?
You should budget for:
• Mortgage repayments – this will depend on interest rates, the amount you
borrow, the length of the mortgage, and any fees added to the mortgage
• Rent – low-cost rent based on the proportion of the home you do not own
• Buildings insurance, administration fee and service charges (where applicable)
• Council Tax – payable to Gateshead Council
• Repairs and maintenance of the building
• Contents insurance
• Heating, lighting, water and sewerage charges
• Fittings and furniture
• Savings – for emergencies and to buy further shares
Is Keelman Homes responsible for repairs?
Keelman Homes will be responsible for day-to-day landlord repairs. However, as you are buying a new-build property, there may well be snagging periods and works undertaken under the warranty. Keelman Homes will be responsible for delivering cyclical works related to compliance, such as boiler servicing.
Can I make alterations to my property?
Before making any alterations or additions to the property, you must ask Keelman Homes for their written approval. If permission is granted, you will be responsible for obtaining all licences, permission and consents in relation to the works, including any necessary planning permission and building regulation consent.
Can I get financial advice?
If you are thinking of buying a shared ownership home, we recommend you consult an independent financial advisor (IFA), although this is not a requirement. They will look in detail at your income and expenditure and advise you on what you can afford. A financial advisor may charge you for this advice. They are not employed by either the Help to Buy agent or Keelman Homes, so their advice is impartial.
Any advice from a financial advisor about how much you can afford is not necessarily the amount you will end up buying. If you need a mortgage, your lender will do their own assessment, which may differ in terms of what they think you can afford and, more importantly, how much they are willing to lend you by way of a mortgage.
Will I need any legal advice?
When you buy your home it is advisable to appoint a solicitor to act on your behalf, who can deal with the conveyancing process (the legal transfer of the title to you). They are also needed to help you understand the terms of your lease, and deal with Keelman Homes’ legal team. You will need to budget for these legal fees.
How do I apply?
To apply, submit an application form to Keelman Homes.
Your application will be assessed. If you are eligible, you will be asked to provide copies of supporting documentation. Keelman Homes will arrange, and pay for, affordability and credit checks. Keelman Homes may appoint a consultant to act on their behalf to help with these checks and ultimately confirm your eligibility to buy.
This information will be securely held and will be disposed of when it is no longer needed, in accordance with General Data Protection Regulations. When we have all the relevant information, you will be advised whether you qualify to rent a property under the Rent to Buy scheme.
Please DO NOT serve notice at your current property or make any further moving arrangements until you have heard from us regarding the success of your application. Be aware that more than one application could be processed for the same property. The property will be rented to an approved applicant in line with our policy.
Who can I contact about Rent to Buy?
These are guidance notes only. If you have more questions or would like to
discuss the Rent to Buy scheme, please contact:
Janice Adams (Home Ownership Manager)
Civic Centre, Regent Street, Gateshead NE8 1HH
Tel: 0191 433 5396
Text: 0778 620 8277 (Keyword BUY)
Fax: 0191 433 5354
Email: janiceadams@gatesheadhousing.co.uk