If you are interested in buying a new build home, but don't have enough money saved up for a deposit yet you should look into the Rent to Own scheme for Northern Ireland. This scheme is run by Northern Ireland Co-ownership Housing Association. It gives potential purchasers a three year tenancy of a new build property and then issues a 25% rent rebate to the tenant if the tenant decides to buy the property at the end of their tenancy. This rebate must be used to pay part of the deposit required to purchase the property.
How does the scheme work?
A number of companies in Northern Ireland provide “rent to buy” schemes. Only one of these is backed by the government. This government supported scheme is managed by Co-Ownership Housing Association. This scheme gives people an opportunity to move into a new build home as private tenants with an option to purchase the property. Tenants live in the property for a maximum of three years under a fixed term tenancy agreement before either buying the property from Co-ownership or leaving it.
Only certain people and certain properties will be eligible for this scheme. In all cases Co-ownership will look match people who have a reasonable prospect of benefiting from the scheme with properties that should be affordable for them at the end of their three year tenancy term. Co-ownership's assessment will therefore also establish that applicants would not be in a position to purchase after the initial 12 months, unless there is an unforeseen change in their current circumstances.
Which people and properties are eligible for Rent to Own?
You may be eligible for the scheme if you
- are working, including temporary work, or are self-employed
- manage your money well and can afford the rental payments on the property
- are not entitled to housing benefit
- do not qualify buy a property through co-ownership
- do not qualify for a mortgage to purchase a home outright.
Co-ownership will consider purchasing properties through this scheme as long as the property
- is a new build with a 10 year warranty
- is ready to occupy now or in the near future
- has a purchase price under £165,000
- is not a one bedroom property or an apartment
- has a turnkey finish but does not include any extras or add ons to the builder’s basic specifications.
Properties will be provided with white goods but tenants will be required to provide their own furniture.
How much money will tenants get towards their purchasing deposits?
The amount of money that you will receive back if you decide to purchase the home you’ve been renting from Co-ownership depends on
- how much your rent is and
- how long you’ve been renting the property.
You will receive 20% of the rent you’ve paid back if you decide to buy the property, provided that you keep to the terms of your agreement with Co-ownership. This money will be added to your down payment and your tenancy deposit giving you a useful lump sum that can be used to cover some of the deposit you’ll need to buy the property.
You can rent the property for up to 3 years. If your circumstances change for the better, you may apply to buy the property at any time after the first year. If you rented for the whole 3 years and paid a deposit of £500 and £500 per month rent you would have a rent rebate of £3,600 to put towards your deposit at the end of the three year period (the rent rebate can be used only towards the purchase of a property; Co-ownership will pay it directly to your solicitor at the time, and only for this purpose). Adding the rent rebate to your down payment of £2,500 which is refunded to you, you would have a total lump sum of £6,100.
How to apply
If you've read through the detail and think Rent to Own might be a good option for you, apply online. An adviser will then get in touch with you to make sure that Rent to Own is right for you. You will have to pay a £70 non-refundable assessment fee.
If your application is successful you will have to pay a £2,500 down payment. You will also have to pay a tenancy deposit for your new home and will have to pay rent each month.
Co-ownership will use market rates to set a fair rent for the property. This rent will not increase during your tenancy. Co-ownership will be your landlord while you are a tenant in the property and will be responsible for paying rates, service charges and ground rent associated with the property.
Your status while you are renting
While you rent the property you will remain a tenant and will have no ownership rights. Your rights will be set out in your tenancy agreement, in your rent book and you will also be protected by the provisions of the Rent (NI) Order 1978 and the Private Tenancies (NI) Order 2006 as well as other pieces of legislation which protect private tenants in Northern Ireland. Co-ownership will be responsible for carrying out repairs to the property.
Deciding to buy the property
You can buy the property at any point after your initial one year tenancy, but the longer you wait the larger your rent rebate will be. The scheme is designed for a 3 year period, to put tenants in a position where they will have a sufficient lump sum amassed to enable them to purchase the property.
You will need to arrange a mortgage and may need to save additional money to put towards your deposit. You may want to consider opening a Help to Buy ISA if you are planning on purchasing a home soon.
Deciding you don’t want to buy the property
This scheme is intended to help people buy their own properties. If your circumstances change and you no longer want to buy or are no longer in a position to be able to take on a mortgage, you will have to leave the property at the end of your three year term. If you do not keep to the terms of your tenancy agreement, Co-ownership may seek to terminate your tenancy earlier than this.
You will receive your full down payment back 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 made were unfair.