Many people find their rental costs take up so much of their monthly income, it is nearly impossible to save for a deposit required by mortgage lenders. This is commonly referred to as the “Rent Trap”.
HomeNow gives a real boost to renter’s ability to get on the housing ladder. HomeNow purchase houses for people who don’t have enough money for a typical mortgage deposit. The ideal home is bought and held on their behalf in our HomeNow fund. The person rents the property from the fund and, after five years, benefits from a third of the increase in value of the property (received via a rent refund). This will contribute towards a deposit, either to purchase the house you have been living in or any other property you wish to move to.
On top of sharing the increase in value, our tenants:
- Choose the property they want to live in – you are not restricted to picking from homes for rent, instead you look at homes for sale
- Receive security of tenure – your Assured Shorthold Tenancy agreement is for a period of 5 years, there is no more concern you will be asked to move on just when you have become settled in an area
- Receive financial security – your rent is fixed for 5 years. This means you will know what your biggest expense will be for the next 5 years
Many people may be in a position to afford the monthly cost of a mortgage, though are currently renting and are unable to save up for the deposit they would need to buy a house. These are some of the people we are looking to help.
How does it work?
- You find a house you want to call home
- You approach HomeNow who conduct some checks on both you and the property
- HomeNow buys the property and pays all the purchase fees
- You rent the property from HomeNow for 5 years and your rent is fixed for those 5 years with an option to buy.
- After 5 years renting you share in the property value increase. You will receive one third of the increase in value via a rent refund
- You can use your share of the increase in value as a contribution towards the deposit to buy the home you have been renting, or move out and use the rent refund as a contribution towards a deposit on a different property
Yes, but not a typical house purchase deposit. As a renting tenant you will be required to provide a standard tenancy security deposit. This is equivalent to 4 weeks rent and will be held safely in a government approved tenancy deposit scheme.
Yes. You are also allowed to sublet a room should you want to, but this will require permission from us and in the case where you sublet, you alone are responsible for the property.
Am I eligible?
There are no defined criteria but you must be able to satisfy HomeNow affordability checks. This is where we look at your household income and monthly expenditure to help us understand what level of rent you can afford to pay each month.
As part of the process, we will require the following information from you:
- Your household income
- Proof of employment with historical payslips
- How your household income is split if you’re buying with a partner
- Number of dependants
- Your credit score (your permission is required for us to source this)
- Prior landlord references if applicable
- Details of your monthly expenditure, along with bank statements
We will use a combination of your joint household income and your monthly expenditure to determine what you cann afford to pay in rent. As a general rule, we would not allow the monthly rental payment to be more than 40% of your gross combined income.
Choosing the Property
Yes – You get to choose the house you want to live in as long as you can afford the agreed fixed monthly cost. You will likely find the property you want via an estate agent or online property portal.
No, you can’t choose any property. There are certain criteria that we look for to ensure the property has the best possible chance to increase in value (in line with market expectations) over the 5 year tenancy period. The basic criteria are as follows:
Freehold, leasehold or share of leasehold single family properties with no renovation requirements
Site built homes (no mobile homes, boats or pre-fabricated)
The house must be sold vacant (i.e. no sitting tenant…you can understand why!)
Old build (not new build homes) due to the premium paid on purchase.
Location: We look for property with the below attributes:
- Commutable to the nearest big town / city
- Good transport links (i.e. near a major motorway, train station, etc.)
- Good schools
- Access to good local facilities / amenities
When you buy a property, it will be either on a freehold or a leasehold basis.
Freehold is the outright ownership of the property and the land on which it stands. A freehold estate in land (as opposed to a leasehold) is where the owner of the land has no time limit to the period of ownership.
Leasehold is a method of owning property for a fixed term, but not the land on which it stands. Modern leases are usually 125 years or more, but they can be much shorter. Possession of a leasehold property is often subject to the payment of a small annual ground rent. When the lease expires, ownership of the property reverts back to the freeholder. Flats will always be leasehold, sometimes owned by all the leaseholders and sometimes by a third party freeholder.
No, the property does not have to be new build. As a general rule, the newer the property the better as there are less likely to be any maintenance issues with a new property versus an older one.
What makes HomeNow different?
There are some significant differences between HomeNow and the standard rental model:
- You find the property you want to call home rather than only being able to choose from rental stock, and we will buy it. This means you choose where you want to live and the ideal property. The property must meet a minimum standard which is in the interests of both you and us.
- 5 year term – unlike a standard tenancy agreement, which needs to be renewed periodically, we commit to a 5 year term. This means you have absolute security of tenure and can concentrate on building a home with your family rather than facing the prospect of having to move in the event the agreement is not extended.
- You benefit from financial security as your biggest monthly cost (i.e. your tent) is fixed for 5 years. There is no danger of unforeseen rental increases.
- Most significantly, assuming the house increases in price, you will receive one third of the increase in value over those 5 years (received via a rent refund). Your share of this increase can be used towards funding a deposit (either for this property or another of your choice). Therefore your rental money works for you.
- Shared ownership schemes typically require at least a 5% deposit plus, you may be liable for some of the purchase costs. With HomeNow, you are only required to put down a standard security deposit (4 weeks rent) as you would expect to with any normal rental agreement.
- If the house price falls with a shared ownership scheme, your share of the house is no longer worth the amount you paid for it. With HomeNow, the risk of negative equity sits entirely with Homenow and not the tenant.
- If the house price increases under shared ownership, you only receive the increase of your share of the property. Therefore, if you put down 5% deposit and the house price increases by 100%, you only receive 10% back. With HomeNow you receive 33.3% of any increase.
This is a social impact investment fund aimed at helping address a known social issue (i.e. lack of access to the property ladder, due to the unaffordable mortgage deposit requirement). Historically, social issues such as this were addressed more through philanthropy and charitable donations. However more recently social impact investment funds have emerged with the intention of generating positive, measurable social and environmental impact alongside a financial return. Investors in our fund will still receive a return on their investment, but they will also address this known social issue and helping you generate a contribution towards a deposit.
Living in the property
Yes, you will sign an AST Agreement. The main difference is it will be for a 5 year term instead of the usual 1, 2 or even 3 years you will be used to seeing. From your perspective it provides security of tenure and, as the monthly amount you pay is fixed for the 5 year term , you can manage your budget knowing there will be no unforeseen increases in rental payments.
No, for the 5 year term of the tenancy agreement you are a tenant and you do not own any part of the property. It is at the end of this 5 year term we share the increase in value with you (via a rent refund). You can then use your share as a contribution towards the mortgage deposit to either buy the property you have been living in for 5 years, or buy another property of your choice.
Yes, with our permission we would be happy for you to make cosmetic modifications. We want you to view this as your home, so you can paint the walls, change the carpet and nail up your favourite pictures, no problem at all. These are what we call aesthetic changes. The only things you can’t do (without our permission) are structural changes, changing the kitchen or building an extension. Building work can be problematic and doesn’t always go to plan but we aim to be flexible where possible.
As per the Assured Shorthold Tenancy Agreement, we are responsible for repairs to certain items including:
- electrical wiring
- gas pipes and boilers
- heating and hot water
- chimneys and ventilation
- sinks, baths, toilets, pipes and drains
- the structure and exterior of the building, including walls, stairs and bannisters, roof, external doors and windows.
It is your responsibility to notify us as soon as you notice any issue that requires our attention. However, in return for us sharing the increase in house price with you, we do expect you to look after the property. If you decide you would like us to carry out any maintenance to the property (including to the above listed items), we reserve the right to deduct the cost from your share of the increase in house value. Before we buy any property, it will undergo a survey and so we will be very aware of potential issues that may incur a cost over the 5 year tenancy period (and if there are any issues, we would be unlikely to purchase that property). We will also take out buildings insurance to cover any major issues.
Buying the house after five years
As well as the Assured Shorthold Tenancy Agreement, you will also sign an Option Agreement. If the house reaches a certain value (one that ensures our investors will receive their investment back – the “Investment Value”) this document legally entitles you to purchase the property, should you decide to do so. Only if you decline the offer to buy the property are we then able to offer the property for sale on the open market.
The parties (i.e. you and us) will use all reasonable endeavours to promptly agree the market value of the property. If this has not been agreed within 10 working days of the service of the Option Notice, the matter will be referred to an Expert (being an independent chartered surveyor with at least ten years’ experience in valuing properties similar to the property(s) in question and who is a Member or Fellow of the RICS).
After 5 years, if the price of the house is lower than the property was originally purchased for, there will be no rent refund distributed to you. In this instance, and shortly before the end of your 5 year tenancy, we will consult with our investors and assess the ability of our fund to extend your tenancy. If our investors agree to an extension there will be a new tenancy agreement (with a new rent figure fixed for the duration of the new agreement) for a period of time that it is hoped will allow the property value to increase and for us to then share that increase with you via a rent refund.
Alternatively, at the end of the 5 year tenancy you are of course free to leave the property.
Where the property value is agreed to be below the Investment Value (see “What happens if house prices go down?”), we will consult with our investors and assess the ability of our fund to extend your tenancy. If our investors agree to an extension you will be given the option to stay in the house for an additional period of time, until the house has increased sufficiently in value for our investors to recoup their initial investment. This will be a new agreement and your rent will be reviewed and fixed for the same period as the new Assured Shorthold Tenancy agreement.
HomeNow investors have a minimum investment period of 5 years. Additionally, historical data suggests 5 years is the average amount of time to ensure you, the tenant, generates a minimum 5% deposit.
What if my circumstances change?
This is a 5 year tenancy, and you should approach this with a view that you will be in the property for at least 5 years. We do however understand that people’s circumstances may change. Therefore, after the first 2 years of the tenancy, you may, in the circumstances specified below, end the Tenancy early by giving at least 3 months’ notice in writing:
- You have been unemployed for a period exceeding 6 months
- You are diagnosed with a serious illness or disability
- You are required to relocate for work and cannot reasonably be expected to commute from the Property
We encourage you to notify us of any change in circumstance as soon as you are made aware of it.
It is important to stress, you must avoid breaching the terms of the Assured Shorthold Tenancy agreement. If you do breach the terms (and no remedial action is taken), you will be evicted, you will be liable for any rent remaining on the 5 year term and you will lose any right to the increase in value of the property.
Who is HomeNow?
HomeNow is the trading name of BOMAD Investments Limited. BOMAD Investments Limited is registered with the Financial Conduct Authority as an Alternative Investment Fund Manager. BOMAD Investments Limited manages the investment fund that ultimately buys the property you will move into.
Yes, BOMAD Investments Limited is authorised and regulated by the Financial Conduct Authority (No. 822295). Our full scope of permissions are listed on the FCA’s Financial Services Register. You can find more information on our permissions here.
Your property is not owned by HomeNow. It is owned by a separate company (owned by our investors) specifically set up to buy your property. We (HomeNow) do not have any recourse to the assets or income streams of this ring fenced company. You will be able to continue to rent your property.
The earliest you buy the property is 6 months before the end of your tenancy.