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Beware the rent trap!

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  • Beware the rent trap!

    If you rent a property while looking to buy, do be very careful you don't accidentally step into rental trap.

    In simple terms - when signing a shorthold lease, you often do so for 6 month periods, renewing at the end of each 6 month term.

    The problem arises if you find yourself buying a property part way through your lease - because you are still under contract to pay rent, and so can end up paying your new mortgage and remaining rent for the following few months, placing an unnecessary strain on your finances.

    Of course, it's not always easy to time moving into a new property at the end of the lease period, but do be aware that if you consider that it takes around 6-8 weeks for a property sale to be concluded, then at least you can minimise the impact of rental payments while taking on a mortgage.

    ADDED: It's also important to note that you will also be liable for Council Tax during your lease period, so even if you move to a new property during your lease period, you'll have to pay:

    1. Rent on leased property
    2. Council Tax on leased property
    3. Mortgage on new property
    4. Council Tax on new property

    And that applies for *every* month that you're tenancy agreement is still running!

    This is something that we got clobbered with, but luckily I was aware of the issue enough to try and get the timing right, and in the end I'm only having to pay for 1 extra month for the lease.

    Either way, be aware of this issue and the extra expense it causes.

    Though it is worth noting that *you may* get a discount on the vacated property when you move out - for example, if the property was unfurnished. Ask your local council for details.
    Last edited by brian; 29-08-2006, 01:03 PM.

  • #2
    One of the things I've learned in renting is to negotiate with the owner about the council tax. I've even gotten some to include it in the rent rather than pay it directly. If a property has been sitting for a while, it's worth the shot.

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    • #3
      Good advice. I had a job that restricted me on signing leases that i could possibly be stuck in if i needed to relocate. They really make you commit.

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      • #4
        Originally posted by vicki2 View Post
        One of the things I've learned in renting is to negotiate with the owner about the council tax. I've even gotten some to include it in the rent rather than pay it directly. If a property has been sitting for a while, it's worth the shot.
        Thanks for that information vicki.
        Its great to be able to find tips like this around the board it makes property searching alot more better!

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        • #5
          Originally posted by palefrost View Post
          Good advice. I had a job that restricted me on signing leases that i could possibly be stuck in if i needed to relocate. They really make you commit.
          my former classmates and i experienced the same dilemma back in college. we needed an apartment to stay in near our university during our practicum. we only needed the place for the whole 10 months of the school year but since their contract has a minimum of 1-year lease, we had to pay for the rent for that period of time. luckily, another classmate had a cousin who needed to rent an apartment near a review center for his nursing board exam. the review center happened to be near our university. needless to say, my classmate's cousin and his friends paid for the 2-month remainder of our lease.

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          • #6
            University towns are usually pretty easy for re=renting. Other areas aren't quite so easy especially if they are more rural and not desirable commuting distances.

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            • #7
              Yes, this is good advice, I've known renters who bought a home and after moving into their new home still had to pay rent until the lease was over. What a predicament.

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              • #8
                We rented for a year. We did sign a years lease but after that year we asked if we could do a month by month lease and they had no problem with that. It might be worth checking into if you think you might be buying in the near future.

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                • #9
                  I think that is a good advice. That is why I am so against of signing long-term leases. You can able to have a short-term lease of 6 months and then you can buy a house at the end of the lease.

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                  • #10
                    I think that is a good advice. I would also suggest to anyone if they are thinking about buying a house within a year is to sign a short-term lease.

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                    • #11
                      Yes you do have to watch when you rent a place and make sure you do not get locked into a lease term longer than you want or need.

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                      • #12
                        Originally posted by brian View Post
                        The problem arises if you find yourself buying a property part way through your lease - because you are still under contract to pay rent, and so can end up paying your new mortgage and remaining rent for the following few months, placing an unnecessary strain on your finances.
                        We ended up doing this, but it was just one month and we chose to do it that way. It would have been cutting things too close with the house closing and actual moving things from one place to the other, so we decided to pay an extra month of rent simply so we wouldn't be rushed. It worked well but that would only work for a month-to-month lease and if other tenants haven't already been found.

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