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People are just starting to hear about the rent-to-own concept here in the UK. This way of buying a home offers a way for people to rent what they can’t afford to buy outright today, and enjoy al the benefits of being a home owner straight away. The idea of giving people the use of something today without having to actually buy it first is the same concept as used in car leasing.

One of my rent-to-own home offers some distinct advantages that make it a wise strategy for someone who is unable to qualify for a mortgage today. Five of these advantages are:

Saving a Down Payment

The goal of a rent-to-own home is to give a qualified tenant/buyer the tools to buy a home sooner. A tenant leases a home they want to eventually own for a specific period of time in order to do two things – build a down payment and fix their credit.

In the UK a potential home buyer currently needs a down payment of at least 5% plus transaction costs in order to qualify for a mortgage loan ( and at 95% loan to value, the interest rates will be very high!).

The first advantage of a rent-to-own home is that it acts like a forced savings plan because a fixed amount of the rental payment is set aside each month. A typical home purchase via My Dream Pad helps a tenant save enough money by the end of the lease term to qualify for a mortgage with any leading lender.

Repairing Personal Credit

The other half of the rent-to-own picture involves helping a tenant/buyer repair their credit. Sometimes a tenant is able to do this by simply making their monthly payments on time. Other times they may need to work closely with a credit counsellor to rebuild their credit score or reduce their existing debts throughout the rent-to-own term.

The combination of a good credit score, well managed debts, and a reasonable down payment will help the tenant in getting the banks to say yes when they apply for a mortgage. They will have also gained in financial experience while making themselves more attractive to lenders in the future.

Fixed Monthly Payments

The third advantage of a rent-to-own home is that monthly payments are fixed for the full term of the lease. A normal rental agreement in the UK allows the landlord to increase rents by a certain amount once every 12 months.

This isn’t done with a rent-to-own agreement because increasing the monthly payments by any amount could affect its affordability for the tenant. A fixed monthly payment provides the tenant/buyer with cost certainty and allows them to budget knowing that their basic housing payments will not increase.

Guaranteed Purchase Price

In addition to a fixed monthly lease payment my rent-to-own scheme also fixes the future purchase price of the home at the outset.

Before deciding what the final purchase price will be, the tenant’s current household income, outstanding debts, what they can reasonably afford to buy, and historical property prices in the chosen neighbourhood have already been considered.

Agreeing to the price in advance gives a tenant/buyer the peace of mind that their “get started” money will be enough to buy the home regardless of what its actual value is.

Build Instant Equity

Once a tenant/buyer is approved for a rent-to-own home they are required to pay a document preparation fee of £395 – and their available “get started” funds. This is eventually counted towards the final purchase of the home, giving the tenant equity in the home from the day they make their deposit.

A tenant isn’t limited to the equity created by their down payment though. Most home owners will usually make some type of upgrade to their home, whether it is a deck in the backyard or new cabinets in the kitchen.

The same is often true in a rent-to-own because a tenant/buyer doesn’t have to wait until they’re able to buy the home to start making improvements to it. With my approval you can make upgrades that will usually increase the value of the home and create additional equity for yourself when you buy the house.

A tenant/buyer that’s unable to qualify for a mortgage today can use my rent-to-own scheme to buy a home in as little as 24 or 36 months. This method helps to save a useful down payment and repair their credit. Fixed monthly payments and a guaranteed purchase price provide them with cost certainty.

So it is possible to have your cake and eat it too!

Why not start your journey to home ownership right now… By filling in this short contact form. I’ll then call you straight back to get the ball rolling.

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