Rent to Buy scheme: How does it work?

Ease the transition of renting to buying a home. Read our guide to find out more about the Rent to Buy scheme and if it's right for you.

Esther Shaw Money & Property Journalist

What is Rent to Buy?

Rent to Buy is a government scheme designed to ease the transition from renting to buying a home by providing subsidised rent. You may also hear it referred to as Rent to Save, Rent to Own or Intermediate Rent.

With Rent to Buy in England and Northern Ireland, you rent a newly built home at approximately 20% below the market rate for up to five years (exact period of time varies by property). During that time period, you have the option to buy the property or to buy part of the property under a Shared Ownership scheme. When you get to the end of the time period, you either have to buy part of the property or move out.

In Wales the scheme is known as Rent to Own and works a little differently. You rent a property and pay the going rate for up to five years. After two years you have the option to buy the property. If you decide to buy you will receive 25% of the rent you have paid and 50% of any increase in the property’s value since you moved in to use as a deposit on the purchase. Rent to Buy is not available in Scotland.

How does Rent to Buy work?

• Homes are made available to rent with a shorthold tenancy at a reduced rate of 80% of local market rents.
• The expectation (although not obligation) is that this shorthold period of paying less rent gives you the chance to save for a cash deposit so you can apply to buy a share of the home later. After the shorthold has lapsed, you can purchase the property on shared ownership terms, or move.
• Typically, a lease period will last anywhere from six months to 5 years, depending on the property in question.
• You are free to make an outright offer, or look into a part rent part buy scheme, at any time during your lease.
• Different housing associations use different names, such as Try Before You Buy, Rent Save Buy, Rent to Own, Intermediate Market Rent and more. So, check the terms of what you are being offered by a housing association before signing up.
• Be aware there is very limited availability under this scheme. The exact number varies by local authority.

How does Rent to Own work?

• With Rent to Own, you rent a home at market rate for up to five years.
• Between the end of the second year and the end of the five-year agreement you can apply to buy your home.
• When you apply to buy your home, you will receive 25% of the rent you have paid back plus 50% of any increase in the property value since you moved in. That money can be used towards a deposit to buy the home.

See our range of calculators that can give you an indication of how much you can afford, how much the mortgage will cost you monthly and more

London Living Rent scheme

If you live in London then, Rent to Buy is known as London Living Rent. The scheme is the same as Rent to Buy. You rent a property for less than market rate with the idea that you can then save up a deposit. Tenancies are for a minimum of three years and during that time you are prioritised for shared ownership homes so you can get on the housing ladder.

The Mayor of London publishes benchmark London Living Rent levels for every neighbourhood in the capital, updated annually. These are based on a third of average local household incomes and adjusted for the number of bedrooms in each home. And in most boroughs this will be a significant discount to the market level rent.

Am I eligible for the Rent to Buy scheme?

You are eligible for Rent to Buy if:

• Your household earns £60,000 a year or less. A household can be one person, or you and a partner or you and a friend
• You are a first-time buyer, or you used to own a home but can’t afford to buy one on the open market now
• You have a good credit history

But, to make it more complicated, there are further eligibility criteria, which differ depending on the housing association the property is offered through. Priority is normally given to certain groups such as existing housing association tenants and council tenants, people that fit with local priorities, as well as first-time buyers.

Check whether you qualify by checking the Rent to Buy page on the government’s Own your Home website.  If you are eligible, you will need to contact your local housing associations to start your search.  If you live in London, you will need to contact the Mayor of London’s first steps to home ownership website Homes for Londoners.

If you don’t qualify for Rent to Buy, see our guide to buying your first home for the essential first steps and options to help you get on the property ladder. There are a number of other government schemes aimed at helping you buy a home including shared ownership, and the Lifetime ISA. You can find out more with our guide how the government can help you buy a home. There are also a number of alternative private schemes replacing Help to Buy, which came to an end in March 2023: read What will replace Help to Buy?

How much will I save with Rent to Buy?

With Rent to Buy, you’ll typically pay rent at around 80% of the market rate. Here’s an illustration of how much you could save:

Market rate is: £1,000 a month

Rent to buy rent: £800 a month

Saving: £200 per month

Total saved after three years: £7,200 plus any interest on your savings.

Total saved after five years: £12,000 plus any interest on the savings to be used as a deposit

Advantages and disadvantages of the Rent to Buy scheme

There are pros and cons to consider with Rent to Buy. These include:

Advantages

• Paying less rent makes it easier to save for a deposit. If you plan to save during this time, take a look at our guide on everything you need to know about Lifetime ISAs.
• It may give you access to properties that you otherwise wouldn’t be able to afford.
• By living in the property first you’ll get a good feel for the house and the community.
• You’ll get the first chance to buy the home so another buyer won’t be able to swoop in and snap it up before you.
• You may be able to buy through the Shared Ownership scheme
• You are also dealing with a social landlord, which may offer you an extra feeling of security.

Disadvantages

• If house prices rise during the period you are renting, they might rise beyond your reach. A longer rental period puts you at greater risk of this. In Wales Rent to Own offers 50% of any increase back to you to help with your deposit.
• Limited choice
• You may need to join a waiting list for the scheme.

Should I do it?

If you are eligible for Rent to Buy, it really then depends on the property, the housing association’s offer and whether you will take advantage of the reduced rent to save up for a deposit. The offer is so varied from one housing association to another, you really need to read the small print of what is being offered before weighing up if it will be beneficial for you.

If you do plan to go ahead, in order to make sure you save up enough we’d recommend cost-cutting while you are renting too. We have guides covering everything from slashing your energy bills to how to plan a household budget. You can find them all in the cutting your bills section of our website. If you are looking at signing up and eventually buying the property, check with an independent mortgage adviser first and price up how much this would cost you in monthly repayments. You should ask whether lenders are happy to lend against properties within the Rent to Buy schemes. Don’t forget there are the costs of buying a home to factor in too.

See our range of calculators that can give you an indication of how much you can afford, how much the mortgage will cost you monthly and more

How do I apply?

• If you live in England, previously, your first step was to register with your local Help to Buy agent. They would assess your application and tell you if you were eligible and add you to their database. However, with the phasing out of Help to Buy agents following the closure of the Help to Buy equity loan scheme, the government website is suggesting you check with local councils and housing associations who may also advertise Rent to Buy homes. You can find the names of local housing associations via this government page. Unfortunately, this means if you live in England (outside London) you’ll need to go piecemeal to individual housing associations which is likely to be a much more time-consuming process.
• In the capital, the London Living Rent is still running in the same way and your starting point to find properties remains the Homes for Londoners property search tool.
• If you live in Wales you can apply for Rent to Own via participating landlords. Here is where you can find a list of rent to own landlords.
• In Northern Ireland you can apply via the Co-Ownership website.
• There are different government schemes to help you buy in Scotland.

How do I find a Rent to Buy house?

• You should also be proactive and browse for properties on your local Help to Buy agent’s website. Obviously as stated above, this isn’t quite as simple now and if you’re in England, but outside London, you’ll need to approach housing associations directly.
• Find a property you like the look of and ring the number on the advert to check your eligibility.

Rent to Buy mortgages: What do I need to know?

If you want to buy your Rent to Buy property, you’ll need a deposit of at least 5% of the property’s value. However, if you’re buying a share of the property through Shared Ownership you will need a smaller deposit. Either way, when you’re buying a property it’s important to get expert mortgage advice. By speaking to a fee-free mortgage broker, they’ll search the market for the best mortgage for you and guide you through the process too.

Who is responsible for maintenance and repairs to a Rent to Buy property?

While you’re renting, repairs are usually taken care of by the housing association. But check the exact terms in your agreement as schemes can vary.

Rent to Buy and Shared Ownership

Many Rent to Buy schemes allow you to buy a portion of your home rather than the whole thing. This is known as shared ownership. You buy say 25% of your home and continue to rent the rest of it. In the future you can then choose to buy more of your home through a process called staircasing. You can find out more with our guide to shared ownership.

While shared ownership offers an affordable way to get on the housing ladder there are some problems with it. Read more in Shared Ownership: What to watch out for.

Other ways to buy

There are a number of government schemes designed to help you buy a home, which could be worth investigating. This includes:

• Shared ownership allows you to buy a portion of a new build home and rent the rest, as long as you meet some very specific eligibility criteria.
• Right to Buy allows council tenants to buy their home at a discounted price.
• Guarantor mortgages allow you to get a mortgage even if you have no deposit. A mortgage guarantor is someone – usually a parent, a relative or even a close friend – who will cover your mortgage repayments if you can’t pay them for any reason.

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