How is rent calculated?
The rent we charge is based on several factors, such as the local property rental market, how active the market is, property size and location, our own cost of capital, and business costs and strategy.
We do our best to make our pricing as competitive as possible, but ultimately we need to make the agreement financially viable for us as a business too. This means in some areas we could end up at the top end of the market, whilst in other areas we may end up at the bottom end.
The rent is always calculated on our share of the property and not the equity you own. This means if you have a 20% equity share in the property, rent will be calculated on the remaining 80%.
Here’s an example*:
If a 200k property has an average market rental rate of £1,000 per month
Your deposit amount (equity) - £50,000
Your rent - £750 per month
The saving you make from the rental discount will be allocated to your share of equity. For example*, if you receive a 50% discount in one month for meeting your monthly target payment, we will automatically put £375 of your rent payment towards your equity. Your monthly payment amount won't change, but you will benefit from a higher rate of equity.
*Figures are purely illustrative and actual rental discount will vary
How is rent reviewed?
Your rental rate is reviewed annually. We do not base these on macroeconomic indicators such as Bank of England base interest rate movements. Instead, we base them on factors more relevant to your actual property - namely local property price movements in the postal vicinity of your home.
This means if the local property prices are increasing, our rent will increase in line with that. It’s also possible in some situations that local property prices decrease, and therefore your rent can decrease too.
We don't want you to get any nasty shocks at the rent review, so we've capped the amount your rent can increase or decrease by. This means your total monthly target payments should not move more than around 1-2% in any given year.
Remember, the rent you will pay after a review will continue to take into account the equity contributions that you have made towards your property; the more equity you own, the less rent you will be paying overall.
Unlike a bank, we have a genuine partnership in the property, meaning our interests are aligned. We want to ensure our home purchase model is not only fair, but also affordable and secure for our customers, which is why we also allow you to rely on your ‘equity buffer’ if times ever get tough.
To learn more about how we’ve structured our equity buffer model to provide you extra rent support, click here.