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How is rent calculated and reviewed?
How is rent calculated and reviewed?
Rent is reviewed annually and is based on several factors.
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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 our 80% equity share.

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

Rental discount

We will usually give you a further rental discount in any month where you meet your monthly target payment. You can find out how our rental discount is calculated here.

The saving you make from the rental discount will be allocated to your share of equity, so if you receive a 50% discount one month and pay £375 towards rent, the £375 saving will automatically be put towards your equity. This means your monthly payment amount won’t change, but you will benefit from a higher rate of equity.

How is rent reviewed?

Your rent is reviewed and fixed annually, based on local property price movements. We do not factor in macroeconomic indicators such as Bank of England’s base interest rate.

This means if the local property price increases slightly, our rent will increase in line with that. It’s also possible in some situations this price decreases, and therefore your rent may decrease slightly too.

Remember, your rent review will also be taking your equity contributions that you’ll be making towards your property into account too; the more equity of the house you own, the less rent you’ll be paying on our share.

We don’t want you to get any nasty shocks at the rent price, so we’ve capped the amount your rent can increase or decrease by to no more than 5% in any given year. This means that if house prices increase by 20%, your maximum rent increase would remain at 5% maximum. If the house prices go down then the rent could also reduce by up to 5%.

This positions our rent at a very competitive price to a bank mortgage - our rent is slightly cheaper. Unlike a bank, we have a genuine partnership in the product and should anything happen to the property, we share the risk.

We wanted our home purchase model to be fair and affordable for our customers, which why is why we chose to introduce an ‘equity buffer’.

To learn more about how we’ve structured our equity buffer model to provide you extra rent support, click here.

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