Can somebody please explain how these work I cant find much on the internet about this. cheers
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Hi,

You buy a property, you rent it out, your tenent leaves, you can not pay the mortgage, you find out it is worth less than you paid for it, you are in a mess. Best left well alone in my opnion.

Regards
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LOL

Thought you meant buy to let, should read your post before replying. I assume that you mean shared ownership? This operates on you owning a portion of the property and some other institution owning the rest. It is basically a mortgage but with much lower payments as you are only paying for your portion of the equity. This concept was applied quite widely in London for social housing as the level of equity ie mortgage repayments was tailored to be roughly the same as the rent that council tenents were previously paying. I have not heard of this scheme recently so do not know whether or not it is still operated.

Regards
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If you are talking about shared ownership, as Phil suggested, I bought a property some years ago on that basis, so have some experience of it.

I bought a quarter share of a flat, at the time valued at ?4,000. So my mortgage was ?0,000 (I put ?,000 deposit down), and I rented the other 3/4 from a housing association.

A great idea (I couldn't afford to buy the whole property at that point), except................... the rent on the 3/4 was extremely high. It was more than a mortgage on the entire propery, but I didn't have the income to borrow the amount I needed to buy the entire property. Also, the rent was reviewed regularly, and increased during the 18 months I had the property. I don't recall the figures (I'm going back 20 years or so), but the rent was disproportionately more than the mortgage.

Luckily (in reflection), I was offered a good job and relocation package, so sold my 1/4 share and moved away and bought a whole house.

The theory is that as your salary increases you buy more of a share in the property. I'm not sure if that works in practice.

I think it's a psychology thing - I don't like not knowing from one year to the next what my outgoings are going to be, and now I'm glad I didn't stay there too long. I was a bit naive at the time, and I didn't know the rent figure before I took on the flat.

It's a good idea in principle, but I think you really need to look deeply into it.

MoK
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Hi

This is where you rent out the property that you live in, with the sole purpose of buying another property.

Providing the rent you obtain satisfactorily covers the mortgage then this is ignored as a commitment by the new lender allowing you to buy another property.

Not all lenders offer this type of mortgage and their criteria does differ.

Hope this helps
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Hi,
The term "let to buy", is when you let the property you own to buy another property to live in.
Your lender would have to agree, or you would have to re-mortgage. In todays climate I would think you would need at least a 25% equity in the property you wish to let, and the same amount for the new one.
You then have to consider the rental calculation to see if that would cover the mortgage, so it is not straight forward. For more info give me a call. Barry.
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Hi Dynamic08,

I have just joined this forum, and wanted to tell you what rent 2 buy is because I have just uploaded my own website that specialises in just that. Rent 2 Buy is where a Tenant rents a property with the option to buy it at a later date for a price that is agreed from the beginning. There are number of ways that this scheme can be executed , visit my site rent2buyhomes.org for more information on how this fantastic scheme works. This is a system that is widely used in America and is even Government Regulated.

Hope you find the info useful.
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Yes I was just going to add that instead of renting out your existing property to buy another, as developers are getting deperate to offload their stock, the new idea is you rent a new property, live in it and after a certain period ie. 12 months, you are given the option to buy it at the same price.

Or another variation is to buy 75% now and 25% later. This differs from the classic shared ownership schemes in that you don't pay rent on the balance but pay the 25% in a lump sum in say 10 years.

Both of these schemes are dangerous because:
1. a new build property usually has a premium of 10% because it is new which disappears the minute someone lives in it
2. if prices go down, you could end up having to pay more than the property is worth in the second scenario. In the first scenario you have the option of moving out of course.

If prices go up then you benefit but it is a gamble either way.
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I still don't think you have grasped the basics of rent 2 buy, your talking about shared ownership schemes. with rent 2 buy there is no shared ownership and it is not exclusive to new build properties, you can rent 2 buy any property from flats to office blocks. Its ideal for people that want to get on the property ladder, can afford to pay a mortgage but maybe don't have a deposit saved, or have a few blips on their credit report for a number of different reasons or maybe they just don't meet mortgage lenders current criteria. with rent 2 buy you rent the property first and you have the first option 2 buy it anytime within the specified time period normally between 1 and 5 years, this gives you a chance to save your deposit (normally done by paying extra on your monthly rent), clean up your credit report or wait for the current lending criteria to change in your favour. If you are not in a position to excerise your option to buy then you can sell the property instead, keeping any equity over the asking price and if housing prices do fall like they are at the moment WHICH HAD NOTHING TO DO WITH RENT 2 BUY SCHEMES BUT EVERYTHING TO DO WITH SO CALLED SAFE TRADITIONAL METHODS then you can get an extension, As I said this system is widely used in America and Australia because it is a way for people who don't fit in the box to acquire property too. This system works well for landlords and tenants alike,

lanlords mortgage payments are covered monthly = stress free landlord

landlord has spare money to do repairs

tenants normally take better care of the propety because they have vested interest in it.

tenants are not paying dead rent money they are investing in a property.

its away for tenants to own a home without first having to save thousands of £s for a deposit. This way you get to rent a house that you would like to buy and essentially pay of your deposit in installments.

you say that its a gamble to buy a property under a rent 2 buy scheme but its a gamble buying property no matter which method you choose, i'm sure alot of people that acquired mortgages a couple of years ago thought this a good deal. now THOUSANDS of those people are facing repossession. There really is no such thing as dangerous schemes when it comes to buying property because in one way or another they all have an element of risk attached, which means that it all comes down to choosing a scheme is best suited to your circumstances and making sure you receive good legal advice.

P.s even the British Government is coming up with its own rrent 2 buy schemes.
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