A guide to getting on the property ladder

How much of your Rent Money goes towards the Purchase?

The problem

Ask most people who want to own their own home what the number one obstacle is and they will say the deposit.

Saving up this money before you can get the keys, whilst shelling out on rent, seems to be an experience most of us go through at some point in our lives from which it can be difficult to see a way forward and to make the jump from renter to owner.

Latest figures from the Bank of England indicate that first-time buyers need to stump up an average deposit of around £30,000 with the average age being 39!

Renting is even worse is when you consider that all you are actually doing is paying off the landlord’s mortgage so that they can make the profit at the end of the day from your rent money! This is their profit that you are paying for but will never see a penny of! Therefore the expression of ‘rent money being dead money’ is no coincidence!

The modern solution

This is where ‘Rent Now, Buy Later’ steps in. A totally new way of owning and controlling your new home today by saving up your purchase deposit whilst you live in the property rather than before you move in. This approach has proved to be very popular in Australia and other parts of Europe, USA and is now to taking off in a big way here in the UK.

The good news

The important point with these schemes is that the purchase price you’ll be buying the property for is agreed on day one and any increase in that value of your property is yours to keep. A new kitchen could cost you £2,000 yet add £7,000 to the value – again all yours to keep. Even a quick run round with the paintbrush could add thousands to the value of your home and that’s just a few days work!

Typically you’ll pay a much smaller amount to move in (usually from 3% of the purchase price) and some firms will even allow you to spread this over a number of months. Also, part of your rent money will go towards the purchase of the property, and after a period that could be anything from 1 year to 5 years, you’ll purchase your property at the price agreed on day one with a new mortgage, with the deposit being paid for by the contributions that you’ve saved for while you lived there!

In many ways this is like ‘Try before you buy’ because if something were to change, your employer wanted you to relocate for example, you can walk away with just 2 months notice and no black marks on your credit file. You will no longer be hamstrung by a property you no longer want or need.

Solicitors are always involved to ensure that your interests are protected and many companies will even pay your legal costs to make the whole process as painless as possible.

It’s important to understand that unlike the government schemes, this allows you to own 100% of your home from day one rather than shared ownership – yours to improve or sell as you see fit – after all, it’s your home, it’s your castle.

Whilst this might not be your ‘forever home’, what it does provide is that essential jump onto the property ladder; the opportunity to own your own home and no longer be paying dead rent money to landlords, while enjoying the benefits of home ownership today.

Thanks to David Croissant