Example 2 - How rent-to-own works
Susan lives with her partner and two children. She is a teacher earning £25,000 a year and has recently moved to Devon with her husband Steve. Because he is new to the area he has yet to find a job. On her own salary Susan can't afford to buy the kind of house they want under the rules of a normal house purchase. They have no option but to pay dead rent money every month on a house they don't own. However, she notices a house available on a 'rent now, buy later' deal.
The house is a 3 bedroom town house in Devon
Agreed house price £200,000
Normal rental price for the house £625 a month
Susan needs a 5% (£10,000) deposit to get a mortgage
The rent-to-own agreement could look like this:
deposit when she buys the house
Susan has accumulated £10,000 towards buying the house.
After 3 years Susan and Steve have now got the 5% deposit needed to get a mortgage.
Steve is working full-time and between them they are in a position to get a 95% mortgage
to buy the house.
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