First time buyer and rental options

Intermediate Rent, Rent to Buy, London Living Rent and other home-buying options

While Share to Buy specialise in affordable home ownership schemes such as Shared Ownership and Help to Buy, we understand that not everyone will be in a position to buy a their first home straight away. However, there are a number of affordable rental options tailored to those who intend to get on the housing ladder in the next few years including Intermediate Rent, Rent to Save and London Living Rent.

Intermediate Rent

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Intermediate Rent is designed to help first time buyers who can’t yet afford to buy a home, but want the chance to save for a deposit to purchase a home within the next five years.

This rental option offers budding buyers the opportunity to rent a brand new or refurbished home at less than the market rate. The rent is subsidised, normally at approximately 20% lower than what you would expect to pay for a similar home in a similar area if you were renting on the private market. As well as being more affordable, you have the assurance that your home is built, managed and let by a registered housing provider.

Homes available through Intermediate Rent are usually let on an Assured Shorthold Tenancy basis with a six month contract period. You may have the opportunity to rent a home for longer than this initial contract period – for example, up to five years – but this will depend on your landlord’s future plans for the home.

To be eligible for Intermediate Rent, you must meet certain criteria:

  • Your total household income must be less than £90,000 if in London, or less than £80,000 outside of London.
  • You must be unable to afford to buy a suitable property on the open market.
  • You must not already own another home.
  • You must be able to afford 80% of the local market rent without assistance.
  • For some developments, there may be additional criteria such as priority given to those who currently live or work in the local area.

Rent to Buy

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With Rent to Buy, working households are able to rent a new build home on an Intermediate Rent basis. The property will be let at up to 80% of the equivalent market rent (a 20% subsidised rate) with a fixed rate of inflation. You can then go on to make an offer to purchase the property on a Shared Ownership basis when you can afford to; this can be done at anytime during the outlined tenancy as long as you’re still eligible for the scheme.

The property would be let on an assured shorthold tenancy for a fixed term for up to five years which will be linked to (but not necessarily the same as) the required savings period. A savings plan will be put in place to help you raise a sufficient deposit to purchase on either Shared Ownership or equity loan terms within five years. The housing provider will discuss your deposit savings during regular reviews to check your progress, and the savings period can also be extended if you still want to buy but need a bit more time.

When you decide to buy, your housing provider will assess what share of the property can be bought based on an independent financial assessment of what you can afford. Please note that terms and incentives may vary from development to development. The tenancy can also be ended at any point, subject to the terms of your tenancy agreement and initial fixed terms being spent.

To be eligible for Rent to Buy, you must meet certain criteria:

  • At the time of letting, you must be a working household.
  • You must not already own another home.
  • You must be able to demonstrate that you have a good credit history (no bad debts or County Court Judgements).
  • For some developments, there may be additional criteria such as priority given to those who currently live or work in the local area.

London Living Rent

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Available to eligible renters within the capital, London Living Rent homes are for middle-income households who currently rent and are aiming to build up savings to eventually buy a home through Shared Ownership or outright purchase.

The homes are offered on tenancies of a minimum of three years with below-market value rent, however this can be extended to a maximum of 10 years. Landlords are expected to encourage their tenants into home ownership within a decade, with tenants being given support to save and have the option to buy their home on a Shared Ownership basis during the period of their tenancy. They will also be given extra priority for other Shared Ownership homes across London.

The amount of rent you pay will vary according to where you live in the capital. The Mayor publishes benchmark London Living Rent levels for every neighbourhood on a yearly basis, and these are based on a third of average local household incomes and adjusted for the number of bedrooms in each home. To ensure family-sized London Living Rent homes are affordable, the rent for a three bedroom home will be set at no more than 10% above the two bedroom rent.

To be eligible for London Living Rent, you must meet certain criteria:

  • You must live or work in London. Please note that priority will generally be given to those who live or work in the borough where the property is located.
  • You must be renting in London.
  • Your household income must not exceed £60,000.
  • You must not already own another home.
  • You must be unable to currently buy a home – including through Shared Ownership – in your local area.

Discount Full Ownership

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Discount Full Ownership is currently provided by Pocket Living. Pocket Living is an innovative housing developer, supported by the Mayor of London and Homes England, delivering affordable homes for first time buyers. Pocket homes sell for at least 20% below local market prices, with the buyer purchasing 100% of the home. Unlike Shared Ownership, this means that there is no equity retained by the developer or local authority, no rent to pay and no staircasing.

You will need to arrange a mortgage, which will typically require a deposit of 15% of the sale price. The amount of deposit required will depend on the mortgage provider you choose, the terms of the mortgage, your income and your credit rating. You will also need to cover the cost of the mortgage valuation or survey, legal fees, and any Stamp Duty (if applicable), which typically comes to approximately £4,000. Finally, in addition to your mortgage repayments, when you move in you will also need to pay a reasonable service charge for maintenance and upkeep of communal areas and the grounds of your building – this varies from building to building.

To be eligible for Discount Full Ownership, you must meet certain criteria:

  • You need to live or work in the borough of the development, although this may extend to all London boroughs after a set period of time.
  • Your household income must not exceed £90,000. However, please be aware that particular local authorities sometimes set a lower income cap for a set period of time.
  • You must not already own another home.

“When I found out about Pocket last year, I had to double check everything as I couldn’t believe there was a home that I could afford to buy that could actually be mine and I could stay in a place I’ve come to call my home.”

– Anne, Discount Full Ownership purchaser at Pocket Living’s Varcoe Road, Southwark

Discount Market Sale

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Discount Market Sale – also known as Council Shared Equity or a reduced market value scheme – is a low cost home ownership product where a new build property is purchased at a discounted price. This discount is usually around 20%, with the scheme aiming to help low and middle earners who live or work in the borough to get onto the property ladder.

As the property is discounted, housing costs are reduced significantly. Applicants will need a mortgage and/or savings to cover the discounted price of the property, and monthly outgoings will comprise of a mortgage payment and service charge. Unlike Shared Ownership, there is no rent to pay on the remaining interest held by the council.

An applicant may buy a new build property on certain developments for a percentage of it’s current value, provided that when they come to sell it, they only receive the same percentage of it’s current value back, enabling the home to remain affordable to a resale purchaser. You may be able to staircase (buy the remaining shares) from the council, but it is at their discretion and you will have to do it in one go.

To be eligible for Discount Market Sale, you must meet certain criteria:

  • You need to live or work in the borough of the development, sometimes for a certain number of years.
  • At the time of application, your household income must not exceed 45% of the Discount Market Sale price of the property.
  • You must not already own another home.

First Homes Discount

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Under a new home-buying scheme proposed by the government, first time buyers will be able to purchase a new build home with a 30% discount. Initially announced on February 9th 2020, the First Homes scheme will give people in England the chance to buy a home in their local area for nearly a third less than the market price – saving them an average of almost £100,000.

The government is currently consulting on the scheme and no date has been set for its introduction. In the meantime, you can read more about the new scheme and it’s eligibility criteria on our First Homes Discount page.

Share to Buy is a one stop shop for affordable homes. On our website, you can search for propertiescompare mortgages and find out all you need to know about alternative home buying schemes such as Shared Ownership and Help to Buy.