What is the rent to buy NI scheme (Rent to own)?
The rent to buy NI scheme(Rent to own) is another name for the rent to own scheme in Northern Ireland.
There are many schemes such as this but the only one backed by the Government is the rent to buy NI scheme(Rent to own) run by the Northern Ireland co-ownership housing association.
The rent to buy scheme NI is a government-backed scheme for those people who are unable to buy a home and need some government help to buy their home in NI. with the rent to buy NI scheme( Rent to own) you rent a property under a fixed tenancy agreement for a maximum of 3 years after which you will have the option to buy the property.
You can choose to buy the rent to buy NI scheme( Rent to own) property with a mortgage or through the co-own shared ownership style product run by the Northern Ireland Co-ownership housing association.
You will have to buy the property at its current market value(and will be at least the price the landlord paid for it) at the point at which you declare your intentions to buy it and you will get a 20% refund of the rent you paid over the term you were a tenant under the rent to buy NI scheme(Rent to own).
The 20% refund of rent which you get when you start the buying process of a home through the rent to buy NI scheme(Rent to own) will be paid towards your conveyancer and can only be used towards the purchase of the property e.g for your mortgage deposit.
You can choose to buy the property at any time during the rent to buy NI scheme(Rent to own) and do not have to wait for 3 years to pass to take advantage of the rent to buy NI scheme(Rent to own).
The rent to buy NI scheme(rent to own) has a few advantages. Here are some
The rent to buy NI scheme(rent to own) allows you to build up your credit score and history by making regular rent payments. This means your mortgage affordability could increase by the time you want to buy a property.
The rent to buy NI scheme(rent to own) allows you to save up a mortgage deposit.](/what-is-a-mortgage-deposit/)
The rent to buy NI scheme(rent to own) allows you to choose a property you want to buy and gives you the opportunity to own that property.
what are the eligibility requirements for the rent to buy NI scheme(rent to own)
To be eligible for the rent to buy NI scheme(rent to own) you will need to meet the following requirements.
- When assessing your eligibility for the rent to buy NI scheme(rent to own) the co-ownership housing association may want to see that you are in a position to buy the home after your first 12 months of being on the rent to buy NI scheme(rent to own) except some unforeseen circumstance occurs which reduces your mortgage affordability.
- You will also need to be working, this could be self-employment and even temporary work.
- You must be able to afford the rental payments and your finances should look in order.
- You should not be able to buy a property through c0-ownership which is similar to a shared ownership scheme.
- You must not be entitled to housing benefits
- You must not be able to buy a house outright or with a mortgage
For a property to be eligible for the rent to buy NI scheme(rent to own)
- It must have a purchase price below £165,000
- It must be a new build property with a 10-year warranty
- It must be immediately ready for you to move into or habitable in the very near future,
- It must not be a one-bedroom apartment or house
- It cannot be an apartment
- The property must have a turnkey finish but not include any extras or add ons to the builder’s basic specifications.
- Properties will be provided with the basics(white goods) but you will be expected to furnish the property.
“White goods refer to large electrical home appliances that are typically finished in white enamel. In letting/rental terms, they generally refer to the major kitchen appliances, such as fridges, washing machines and dishwashers.”
How to apply for the rent to buy NI scheme(rent to own)
To make an application to the rent to buy NI scheme(rent to own) you should go on the northern Ireland co-ownership housing associations website and make an inquiry. An advisor will then get in contact with you and walk you through the rent to buy NI process.
You will need to pay a down payment of £2,500, a tenancy deposit and be able to pay the market value rent on the property each month.
The rent on the property will be set by the market and may even be below-market rent. The rent on the property will be fixed for the 3 years and will not increase at any point. You will be responsible for paying you rent, any ground rent, rates and service charges for the property.
You will be a tenant throughout the duration of your tenancy and therefore be protected by the law as a tenant in NI.
Buying the property through the rent to NI scheme(rent to own)
You can buy the property after 12 months with the rent to buy NI scheme(rent to own) but you may choose to wait longer as you will receive a bigger rent refund.
If you reach the end of your 3 year period and find that you do not have enough money for a mortgage deposit then co-ownership housing association may allow you to port the rent rebate towards another property.
If you are unable to buy the property at the end of your 3-year term then you will have to leave the property but may not receive any rent refund.
If you breach the terms of your tenancy agreement then Co-ownership may seek to terminate your tenancy immediately.
According to the rent to buy NI website, it states “You will receive your full down payment back from Co-ownership and should receive your deposit back, minus any deductions for rent owed or damage caused to the property during the tenancy.
Your deposit will be protected with an approved scheme, and you can ask this scheme to adjudicate if you believe that any of the deductions were unfair.”
Alternatives to the rent to buy NI scheme
If you can’t save up a mortgage deposit needed to make you eligible for a mortgage after your 3 years with the rent to buy NI scheme then you may be able to access a range of 100% LTV mortgages.
They are a certain type of mortgage known as a family springboard mortgage, they include mortgages from lenders such as the Barclays family springboard mortgage, the Lloyds lend a hand mortgage or the post office family link mortgage.
You may also be eligible for some of the government home buyer schemes which can either reduce the total price of your home purchase or an equity loan towards your mortgage deposit.
The government schemes you may be able to use include:
- Lifetime ISA– gives you a government bonus of £1,000 if you save the maximum £4,000 a year.
- Help to buy ISA– gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000. Before you get either you should consider which is better. Lifetime ISA vs Help to buy ISA.
- Help to buy equity loan– gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.
- Shared ownership- You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage.
- Armed forces help to buy- similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
- Rent to buy- This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
- Right to buy- allows you to buy your home at a discount price.
- Preserved right to buy- same as above.
- Right to acquire- same as above.
Depending on where you live, you may also be able to take advantage of home buying schemes provided by your local council. Example: In Norwich, the local councils provide the Norwich home options scheme.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.