Buying

What is the Intermediate Rent Scheme in London?

Posted May 30, 2024
What is the Intermediate Rent Scheme in London?

Owning a home can seem out of reach, especially at today’s high property prices. Yet, there are affordable housing schemes to help people buy homes without heavy financial burdens. If you’re considering buying a home through an affordable housing scheme, here’s what you need to know about Intermediate Rent and its potential benefits.

The Intermediate Rent Scheme helps those who can’t afford market-rate properties but earn too much for social housing. It offers rental properties at 20% less than local market rents. This allows renters to save money over time and eventually gather enough savings for a home deposit.

Guinness Homes does not offer Intermediate Rent. This article is to provide you with information on the scheme and compare it with other affordable housing schemes such as Shared Ownership so you can make an informed decision. You should also seek financial advice from a professional.

Eligibility criteria for Intermediate Rent

  • Income Restrictions: Intermediate Rent targets middle-income families and individuals priced out of the housing market. Generally, income caps apply to qualify for this scheme. These caps vary by region.
  • Employment Status: Most schemes require applicants to have permanent jobs. Some may prioritise key workers like NHS staff, teachers, or police officers.
  • Housing Needs: Priority might also go to current social housing tenants and those on local authority waiting lists.

The above list will vary depending on the area where the scheme is offered and there might be additional criteria not covered above.

Saving for the future and option to buy

One major advantage of the Intermediate Rent Scheme is that it allows you to save money while renting at a lower rate.

You can use these savings to build up a deposit for buying a home in the future. This focus on both affordability and saving makes it appealing for those serious about owning a home.

Some Intermediate Rent properties offer an option to buy through shared ownership or another affordable homeownership scheme.

After a few years, you may be able to purchase part of the property, gradually increasing your ownership stake over time.

Intermediate Rent vs Shared Ownership

Monthly Outgoings

Intermediate Rent: This option offers reduced rent, giving you more room to save. It’s particularly affordable in high-rent areas.

Shared Ownership: You’ll pay both mortgage repayments and rent on the portion of the property you don’t own. Initially, this might be higher than Intermediate Rent, but these payments contribute towards eventual property ownership.

Path to Homeownership

Intermediate Rent: This plan offers cheaper rent, helping you save for a future home deposit. During the tenancy, you don’t own any part of the property. Some Intermediate Rent properties might allow buying later, but this isn’t always guaranteed.

Shared Ownership: With Shared Ownership, you buy a share of the property (usually 25% to 75%) and pay rent on the rest. You can increase your ownership over time through “staircasing,” possibly leading to full ownership.

Financial Commitment

Intermediate Rent: The initial cost is low. You pay reduced rent and a small deposit equivalent to one month’s rent. There’s no need for a mortgage or large upfront costs for purchasing.

Shared Ownership: Initial costs are higher due to needing a mortgage deposit and fees like legal costs and surveys. However, these payments help you own part of the property. Mortgage payments build equity, offering long-term financial benefits.

Long-Term Financial Benefits

Intermediate Rent: While it helps you save for future homeownership, it doesn’t build equity. You’re still subject to rent increases and miss out on any increase in property value.

Shared Ownership: As you buy more shares, you build equity. If property values rise, so does your investment’s worth. This combination of reduced rent and partial ownership provides strong long-term financial benefits.

Maintenance and Responsibilities

Intermediate Rent: The landlord handles most maintenance and repairs, easing the tenants’ load. This is great for those not ready to manage upkeep issues of owning a home.

Shared Ownership: As a part-owner, you handle maintenance and upkeep. While this can be costly and time-consuming, it lets you control your living space and make improvements.

Flexibility

Intermediate Rent: Offers more flexibility if your situation changes. Renting makes moving easier without dealing with selling a house.

Shared Ownership: Provides stability but requires long-term commitment. Selling your share is more complex than ending a rental, but still doable.

How to apply for Intermedia Rent

  1. Research
    First, find out if your area offers Intermediate Rent and understand the terms. Check local housing association websites, government affordable housing portals, and property search engines for information.
  2. Eligibility Check
    Confirm you meet eligibility criteria like income limits and employment status. Some schemes offer online tools to check this quickly by entering basic details.
  3. Registration
    Register your interest through local housing associations or councils. This involves filling out an application form and providing documents such as income statements and proof of employment.
  4. Property Search
    After registration, begin looking for available properties on listings from housing associations or councils. Evaluate each option based on location, local amenities, and future buying prospects.
  5. Application and Tenancy Agreement
    Apply for suitable properties that fit your needs. If approved, sign a tenancy agreement detailing rental terms including the discounted rent rate and lease duration.

Conclusion

Buying a home can be tough, especially with high property prices today. Affordable housing schemes like Intermediate Rent offer a solution. This scheme reduces rent costs, helping you save money and build a deposit for future homeownership. While it doesn’t give immediate ownership benefits like Shared Ownership, it’s still a practical option for easing into the market without heavy financial strain.

Research thoroughly and think about your long-term goals before deciding. Speaking with a financial advisor can also provide insights suited to your situation. Whether you choose Intermediate Rent, Shared Ownership, or another scheme, understanding each option helps you make an informed choice and brings you closer to owning your home.