With the uncertainty of the Brexit outcome and living costs on the rise, it’s becoming ever more important to save as much as you can when renting a property.
According to the Deposit Protection Service, last year in London the average renter paid £1,750 to secure their new home. With Londoners earning an average of £727 a week, at best you could end up shelling out between 50-60% of your first wage on a deposit to live in the capital.
However, there are a few alternative options. In recent years several schemes have popped up allowing you to bypass the deposit all together. There are three main solutions that all provide a safety blanket for both Tenant and Landlord when it comes to covering the cost of the initial payment.
Dlighted - the landlord pays for insurance
Landlords or letting agents can take out an insurance policy that’s covers the cost of the your deposit making it initially cheaper for you while still offering security to your landlord, win-win right?
As a tenant, you won’t have to pay anything upfront but as you reach the end of your agreement you will have to cough up for any damages to the property or any unpaid bills during your tenancy.
Pros- According to Dlighted as a tenant this insurance can earn you a no-claims bonus on your rent and count towards improving your credit score.
Cons – It’s not available to everyone. Dlighted pride itself on its “enhanced tenant vetting” system. While this is music for your landlord, it may not be so good for you if you have any bankruptcy issues, CCJs or tricky financial circumstances.
Zero Deposit Scheme (ZDS) – you pay for insurance
This option puts a bit more of the power in your hands rather than your landlord’s as it is you who is responsible for the policy. The Zero Deposit Scheme is backed by Zoopla. Instead of paying a hefty sum upfront, you only have to pay the equivalent of one week’s rent to get your guarantee. It is then in place for the duration of your tenancy and gives your landlord six weeks of cover.
Like the sound of it? If so and you remain in the property for more than 12-months, there is an annual £26 fee for the policy. ZDS will complete the inventory and check out and if there are no disputes, your guarantee expires.
Pros- It reduces the amount you initially have to pay to move into a property so can cut down the time you may spend saving for a deposit.
Cons – It’s up to your landlord’s discretion whether or not they agree to accept a Zero Deposit Scheme in place of the traditional tenancy deposit, so be prepared with a back-up plan in case they turn you down.
Reposit – landlord joins your policy
Last but by no means least, is Reposit. This is also an insurance policy but works differently to the two aforementioned. In this case, as the tenant you pay Reposit a non-refundable sum equal to a week’s worth of rent and in return your landlord is added as a beneficiary on the policy.
Just like Dlighted and the Zero Deposit Scheme, when you reach the end of your tenancy you are still liable to pay for damages. The initial service charge that you pay makes the policy valid for 12-months, if you choose to continue it, there is a £30 annual admin fee.
Pros – The service is relatively stress-free to set up and can save you a lot of money if you are thinking of renting in London. This option is also more inclusive so is available to students, those with no credit score and tenants receiving DSS.
Cons - As well as not getting your money back, a factor that may make you think twice about Reposit is that you are not a beneficiary of the policy so you have no rights in regards to claims or cancelling. Another downside to this service, is it is in favour of the landlord when it comes to disagreements. If you raise a dispute but are unsuccessful, you will have to pay an extra £120. Although 43% of tenants have said they would prefer an insurance-based alternative to paying a deposit, critics of the scheme have expressed concerns that the unregulated market could turn into the “Wild West”.
Eddie Hooker, CEO of MyDeposits said: “Despite the initial attraction, I have been unable to find clear answers to some pertinent questions. Landlords and tenants entering into such contracts should do so with their eyes wide open.”
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