Property Financing for Tenants
Posted on 14th April 2017 by FotoBlogger
With home ownership in the UK hitting the lowest levels in a quarter of a century, renting a property is becoming an increasing popular – and necessary – alternative to stepping onto the housing ladder. As young people find it harder to commit to the financial demands of purchasing their first home, renting a property privately offers a more affordable option. However, for those considering becoming tenants, it is important to understand that renting a home is an important responsibility; weighing up the associated costs and planning finances in advance will help to ensure that tenants stay on the right track and avoid becoming embroiled in debt.
Tenancy Deposit Scheme
Paying your landlord or letting agency a deposit is standard to help you to secure a property and offers the landlord security in the event that there are any outstanding costs at the end of the tenancy agreement. The deposit can vary from a week’s to a couple of months’ rent and usually must be paid before moving into your new home. Disputes may arise at the end of a tenancy between the tenant and the landlord over whether the deposit is to be returned in full, so it is worth enquiring with a prospective landlord if your deposit will be protected through the Tenancy Deposit Scheme (TDS). This Government-backed scheme requires all shorthold tenancy deposits in England and Wales to be protected so that, in the event of a dispute at the end of the tenancy, an independent adjudicator can determine whether the landlord is legitimately withholding all or part of the deposit. The TDS also gives the tenant the reassurance that their money is being deposited securely during the tenancy and may not be used for other purposes.
Your landlord should provide you with an Assured Shorthold Tenancy Agreement (AST). This should clearly state information such as the length of the tenancy, the cost of the rent, your and your landlord’s responsibilities (for example, repairs), notice periods and what happens at the end of the tenancy. Read this thoroughly and make sure that you question any aspects which seem unfair or unclear. There should also be an inventory for the property which will record any areas of wear or damage to furniture or fittings; check these in minute detail when you move in and sign your agreement, so that you are not unfairly charged for damage which was already current when you started the tenancy.
If you are renting via a letting agent it is very likely you will be asked to undergo a credit check to assess your financial status and to predict any likely problems in being able to pay your rent. A negative report will, of course, hinder your application for a particular property; in this situation, enquire with the agent whether they would accept a guarantor. This is a named individual (who will also be credit checked), such as a family member, who can agree to pay the rent in the event that you get into financial difficulty. The guarantor will need to sign their commitment, so obtaining their consent first is essential!
Paying the Rent
Whether you pay your rent on a weekly or monthly basis, you may be required to send the money to your landlord or letting agent by standing order. This offers a degree of protection for the landlord as your bank will automatically send the payment on a designated date, while you can retain a degree of control by stipulating the amount of the payment (as opposed to a direct debit where the payments can be varied by the payee). If you are considering making cash payments or direct transfers instead, consider whether you will always remember to send the money on time. A standing order requires no regular action, other than to make sure the money is in your bank account!
Managing Living Costs
Paying the rent is only one part of your living costs, though it is probably the largest. Before entering into a tenancy, estimate the other bills which will be your responsibility, such as utilities, council tax and telephone and broadband; if these look unaffordable (bearing in mind your other living expenses such as food and transport), seriously consider whether the property is a realistic option.
As a tenant, you retain the rights to change your electricity, gas and broadband providers, so shop around for the best prices and ensure that the meters are read at the start of the tenancy so you avoid inheriting the previous tenant’s bills. Inform the council of your moving in date and remember that you can pay your council tax over ten months a year to make the payments more affordable. Missing utility or council tax payments will rapidly get you into financial trouble, so always talk to the companies in the event of difficulty, to negotiate a manageable solution.
Moving in – and out!
Finally, do bear in mind that moving furniture and possessions can be costly, both in money and time. If you have furniture to transport, obtain quotes from reputable removal firms or, if you can move under your own steam, prices for van rental. If possible, avoid Fridays as removal firms tend to be busier and may charge a premium. If you need to take time off work to move, decide whether you can take this as holiday so you don’t lose out on your pay.
Moving into a new home is an exciting time but the financial aspects must be carefully managed to help you to enjoy a memorable experience instead of becoming laboured with money problems that will haunt you on a daily basis.