Rent to buy scheme - is it kosher??

[SpawnChorus]

Just seen this ad on Rightmove: here

I've never heard of rent to buy, but it sounds like something that would really suit us at the moment. We have a house that we're letting out in the South East, and we can't sell it for another two years (fixed rate mortgage, lender doesn't lend in Scotland). We've just been given notice by our landlord here in Edinburgh, and this advertised flat sounds pretty much what we;re looking for.

They say the purchase value is £240k, which seems to be in accordance with similar properties, but then again it was last sold in 2007 for only £193k...I guess they may have done a ot of improvements??

The monthly payment of £695("rent") + £250 (towards the deposit) would be more expensive than the rent I'd expect to pay for a flat like that, but we can afford it and obv al the money isn't just disappearing into a landlord's pocket.

Anyway, has anyone got any experience of this rent to buy thing? Thanks!

why dont you just get a mortgage?

Because we can't afford to have two mortgages

I have seen this donw on flats that are proving hard to sell by traditional methods. I dont think that there is necessarily anything problematic about that way of buying, and does let you try the place out without really committing yourself.

hmm. Don't understand how it goes down so much in year 2 and 3 as you'd surely still have only contributed 3k pa extra towards reducing the capital yet it goes down by 6k. I'd be wary as it only gives a mobile number and doesn't appear to be part of any official scheme. You'd also want a survey to check it is really with what they claim. At what point can you claim ownership, deeds etc ?

So you are paying rent and mortgage already and that is less than paying two mortgages?

looks very dodgy to me.

OK, I've been googling about it, and it sounds like a scheme that's fairly commonplace in other countries but new to Britain. I think it sounds OK, but I'm not convinced on the advertised sale value. However, one of the websites I was looking at explained that you could actually approach a vendor and offer to buy on a rent-to-buy scheme. Apparently with the market being as it is, people are seeing it as a welcome alternative to strightforward selling/buying.

HerHonesty - we're getting rent on our property down south which covers the mortgage, but surely we wouldn't be approved for taking out a second mortgage in order to buy in Scotland! Especially as we have no ready cash for a deposit.

LIZS - I agree...the maths is a bit -inducing, but the vendor sounds quite normal (just spoken to him to arrange a viewing). I guess we'll just have to see if the property is actually of interest to us, and take it from there.

Spawn

Some lenders are willing to give out a mortage that is secured on both properties. So the mortgate would be over both properties, one in the south east, and one in scotland.

If you have significant equity in one property then it can avoid the need for an actual cash deposit on the second property, because the percentage that you would need to borrow of the total value of both properties could be quite low.

ok if you have no deposit then the scenario is different. but if you did have one then you could get a mortgage as effectively your soutern property is now a buy to let property not your main residential property or mortgage.

bigstripey - is there a way of getting round the fact that our current lender doesn't lend in Scotland? Because otherwise we're left with the original problem of having a fixed rate mortgage which would incur a penalty if we cash out of it.

Its a shame that they dont mortgage scottish properties. Would they be willing to waive the redemtion penalty? (probably not )

I haven't tried asking. Seemed a bit unlikely