What is Part Buy Part Rent and How Does It Work?

Who is eligible for a part buy part rent property?

Part buy part rent properties are aimed at first time buyers or those who used to own a home, but are unable to buy one at the moment. You are eligible if you have a household income that is less than £80,000 per year (in London it is less than £90,000).

Part buy part rent gives you the ability to initially own between 25% and 75% of a property. The remainder of the home is usually owned by a housing association. So you will end up paying part rent as well as a mortgage. It’s a way to get your foot on the property ladder enabling you to part own a home.

Many first time buyers see this a great option to start owning their own home. They don’t have to get a massive deposit because they will only need a mortgage for between 25% and 75% of the property. The rest, as mentioned earlier, is rent which is paid to the housing association that owns the development.

How do I get a mortgage for part buy part rent?

Shared ownership is becoming more mainstream and you will find more and more shared ownership mortgage providers in the marketplace. So there should be enough choice for you to get competitive rates.

There is no need to save for a massive deposit either. In most cases part buy part rent mortgages mean you only need to provide 5% of the value of the property. However, some housing providers may prefer this to be 10%. It is important to note, that as you are buying a share, the amount of deposit you will need to put up will be less.

For example, if you were buying a 50% share in a home valued at £150,000. This means you would only need a deposit of £3,750 (50% of £75,000) for the mortgage. This is only an example, mortgage providers will be able to provide more details about what you can and cannot put down as a deposit.

Are part buy part rent properties leasehold?

Most part buy part rent properties are leasehold. This means that if you have not bought the property outright the housing association will have first refusal to find a buyer for your part buy part rent home for a nominated period, which is usually 8 weeks. After this time if a buyer has not been found you can market the property on the open market much the same as you would if you were selling a home that you owned.

Due to the way the lease is structured for part buy part rent it will mean that the property will be subject to a service charge. If you cannot see them on the property listings get in touch with the housing associations to find out how much this will be.

If you need to find out more about shared ownership leasehold, there are some helpful sites available online, such as The Leasehold Advisory Service.

How do you calculate the rent that is paid on the remaining share?

At the moment, the rent is calculated as being 2.75% of the remaining share divided by 12. So, if we use the same example as we did for mortgage calculation it would be 50% of the property to pay rent on. In our example this would be £75,000 divided by 2.75% which is £2,062.50 per annum. Which means monthly (divided by 12) rent would be £171.88. It is worthwhile checking this with the housing association you are dealing with.

You need to budget for mortgage, rent and service charge payment and possibly a lease extension.

What is staircasing for part buy part rent?

So you have decided after purchasing your part buy part rent home you would like to buy a bigger share. This is known as staircasing. You will need to be able to demonstrate how affordable this is. It is very similar process to remortgaging. The difference being is that you will need to get your property valued to work out how much more you are able to buy and get an appropriate mortgage to cover these larger payments.

The criteria may differ depending on which housing association is running the scheme. As ever it’s best to try and find out what you would need to do in the event of you wanting to purchase more of your part buy part rent home at a later date.

What fees are involved in staircasing?

Firstly, you will need to speak to your housing association to understand what options there are to staircase your home. For example, they may have specific amounts you can staircase at a time.

You will need to pay to get someone round to do a valuation of your part buy part rent property. So, for example, if the value of the property has increased, then it will be more costly to buy a bigger share than it would have been when you decided to part buy part rent it in the first place. However, the good thing is here that your initial share will be worth more than you paid for it.

Don’t forget though that the value could also decrease which would mean your initial share is not worth as much as you originally paid for it. However, you could buy a bigger share cheaper than you could when you first agreed to part buy part rent.

Why is part buy part rent a popular choice with first time buyers?

Part buy part rent not only allows middle and low income earners the opportunity to buy their own home. It also means you can do so with a little less risk. So you don’t have to save for a large deposit and potentially get on the home ownership ladder a little quicker. It’s also a great way to see if you could manage the full expense of owning your own home outright.