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joe_

Rent To Buy

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I'm looking at renting somewhere near where I work, and I noticed there's a "Rent to buy" flat with moat, the rent is a fair bit cheaper than the market rates.

Whats the deal with these? It says they are to help with saving for a deposit (which I am) and you get the option of buying the place in a few years. I already have a fair bit of a deposit (about 20%) and I could probably buy a 1 bed flat right now but I would struggle a bit if the interest rates went up.

Would it be dishonest of me to rent one of these even though I'm not that interested in buying? (Although I would probably consider it if the prices dropped)

I'm guessing theres going to be a few catches, and they will probably tell me to sod off because I have a fair bit of a deposit (even though it wouldn't buy a particularly nice place)

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I'm looking at renting somewhere near where I work, and I noticed there's a "Rent to buy" flat with moat, the rent is a fair bit cheaper than the market rates.

Whats the deal with these? It says they are to help with saving for a deposit (which I am) and you get the option of buying the place in a few years. I already have a fair bit of a deposit (about 20%) and I could probably buy a 1 bed flat right now but I would struggle a bit if the interest rates went up.

Would it be dishonest of me to rent one of these even though I'm not that interested in buying? (Although I would probably consider it if the prices dropped)

I'm guessing theres going to be a few catches, and they will probably tell me to sod off because I have a fair bit of a deposit (even though it wouldn't buy a particularly nice place)

You pay the £x, a portion of which goes to rent and the rest to the "deposit". In y years you then buy the place at todays market value (wouldn't be surprised if the small print has "or current whichever is the greater"), so you get the pleasure of paying for a place in the future which is worth less than you have to pay for it and if you don't buy the deposit money is gone.

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I don't know the figures, but to make it easy to understand this is kind of how it works.

You agree to purchase the property in say 5 years at the price of £100k

The rent would usually be say £400 per month.

With a lease option you will pay say £500 per month.

£400 goes to the landlord/vendor and £100 goes into a secure savings account to build a deposit.

Once the agreed lease term is up i.e. as above 5 years, you then need to complete the purchase at the originally agreed price. In an ideal world (this being for buyers without a deposit now) you will have saved enough in the savings account to cover the deposit required by the lender to be able to borrow the money for the mortgage.

If you do not complete the sale, then you basically are evicted and all the money that you have paid into the savings account is given to the landlord/vendor as compensation for the sale falling through.

In answer to your question, it is not wrong for you to do this, but you will lose £6k using the example above and pish off the landlord/vendor.

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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