| With the financial crisis continuing and banks far more | | | | Yet, not everyone wants to rent and then buy. From |
| selective about who they lend money to, there is a | | | | experience in places like Australia and the United |
| problem in the United Kingdom that sellers can't sell | | | | States, where this type of sale originated, it was found |
| their house because buyers can't borrow to buy! | | | | that people with a higher degree of personal and |
| This has led to a growing number of homes being | | | | financial stability would prefer to buy if given the |
| repossessed, a problem that may well continue due to | | | | opportunity. With things like insufficient deposit and |
| the dependency that everyone has become | | | | residency status in the UK being a couple of reasons |
| accustomed with a banking system. Changing times | | | | for not lending, these would-be buyers are still quite |
| therefore call for changing the way people do | | | | capable of reaching bank qualification status over time |
| business. | | | | and with a payment history behind them. |
| That's where new and innovative ways of buying and | | | | When compared with a "purchase option" the tenants |
| selling property are starting to appear. One of them, | | | | often make concurrent purchase instalments alongside |
| called an instalment contract, is a protracted sale that | | | | their monthly rent that goes towards their later |
| allows the buyer to move into their new home at the | | | | purchase should they decide to buy. If the tenants |
| time of exchange of contract, and not at completion | | | | change their mind, then they also forgo the purchase |
| time when the legal title changes hands. | | | | premiums that safeguarded the purchase conditions in |
| With the purchaser usually only needing to apply for a | | | | the agreement. Thus, the amount of financial |
| mortgage when they do take title, with an instalment | | | | commitment is usually not as great as with an |
| contract that may not occur until some years down | | | | instalment contract where the intention to purchase is |
| the track. In between the buyer makes "terms | | | | agreed just like a normal sale. |
| payments" to the seller rather than repayments to a | | | | In order to accommodate the various financial and |
| bank. In fact, the look and feel of these payments may | | | | legal regulations in the United Kingdom the instalment |
| mirror that of a bank mortgage without ever being | | | | contract has been designed so that there is no "credit" |
| classed as a "mortgage". | | | | element to the agreement. What the buyer is doing is |
| Additionally over the last few years there has been an | | | | simply making a series of instalment payments with no |
| introduction of what are called option agreements | | | | recourse to borrowed money as with a bank. Should |
| whereby a "tenant-buyer" can rent and later purchase | | | | the buyer stop paying the contract is broken, but there |
| their future home concurrently. These types of | | | | is there is no debt hanging over the shoulders of the |
| agreements are a precursor to the later sale of the | | | | buyer as with a mortgage. |
| house using a traditional contract of sale. | | | | |