Example 2

 

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rent-to-own specialists

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:

  • A rent-to-own term of 3 years is agreed
  • She pays £800 a month (£625 rent + £175 rent credit).
  • Over a term of 3 years her total rent credit is £6,300 (36 months x £175)
  • Getting started money is £3,700 (paid up-front) - this will go towards Susan's

deposit when she buys the house

  • Adding together the 'getting started money' and 'total rent credit' means that

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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