Tenant Purchase Scheme is a program that allow home buyers to rent the property they want to purchase for a specific period of time, which leads to ownership of the property.
This promotes accessibility and affordability of home ownership.
It is crucial to fully understand the scheme from the eligibility criteria, application process, its benefits and tips for a successful application.
In this article, we will break down the process for you step by step.
TPS Eligibility Criteria
These are the requirements that must be met by a TPS applicant for them to fully apply for the end user finance.
They differ from different TPS providers and include but not limited to the following characteristics;
- Length of tenancy- Similar to mortgages, TPS have a duration of payment of rent for the tenant to fully own the own. An advantage to this, the applicant can negotiate a comfortable length of tenancy that align with several factors such as their income, age, price of unit, etc.
An applicant must be able to meet the required length of tenancy required by the provider.
- Type of property- It is important to note that note all units or homes have TPS as a payment option. An applicant must find out and verify that the unit/property they are willing to purchase has a TPS payment option.
Most social housing and affordable units in Kenya have the Tenant Purchase Scheme payment option.
- Income requirements- TPS providers require a certain income gap for them to approve a TPS application. This may also vary from applicant to applicant. It is important to negotiate an amount that you can comfortable remit each month, and that your income allows.
- Intent to purchase- A serious interest by the applicant is very crucial. This allows the providers to know what property you are willing to buy, the purchase price and your monthly payment.
It is sort of a serious buyers only process!
- Legal Capacity- The applicant must be able to exercise the legal rights and obligations. They are able to interpret and sign contracts, manage their money and buy property. In other instances, applicants and home buyers usually seek professional legal guidance for this particular reason.
These factors and many others may vary from every TPS providers to determine the eligibility of an applicant.
TPS Financial Considerations
There are associated costs to a purchase that every applicant should consider. They include but not limited to the following;
- Purchase price- The applicant must consider this factor as it determines whether they can afford the unit/property and if the can apply of end user financing.
- Down payment/ Deposit- TPS applicants must be able to pay a percentage deposit within a specific duration of time required by the providers for their application to be approved. This justifies their capability to purchase the unit/property.
- Monthly payments- Applicants must consider the rent of the property/unit they want to purchase. This is for the sake of their budget.
- Maintenance costs- Costs to do with repairs and maintenance of exteriors and interiors such as lifts, roads, water tanks, paintings, etc. This is for the sake of the applicants’ budget.
- Property taxes- As the applicant progresses towards owning the property/unit, they must consider the property taxes as it’s a must pay for property owners for compliance.
- Legal fees– To be paid by the applicant for the lease documents and any other legal services provided during the purchase process.
- Homebuyer insurance– Especially for first time home buyers. Home buyers insurance covers damages to your home, property, personal belongings and other assets in your home.
- Utilities and services- This include service charges, security, water bills, waste management, etc. Very crucial for every homebuyer/TPS applicant to consider.
- Resale value- Applicant must consider the resale value of the property once bought or after/during the length of tenancy. They will be able to figure out whether TPS is a worthy investment.
These associated costs are very important to consider before any purchase or end user financing application.
TPS Application process
Once an applicant has assessed and passed the above critical steps, they are ready for the TPS application process which entails the following;
- Ensure that you meet the eligibility criteria for your application to be accepted.
- Express your interest in end user financing (TPS)
- Submit an application to the providers (this varies from every provider)
- Application review by the providers to ensure you meet the requirements
- Offer of Sale
- Tenant Purchase Scheme Agreement signing
- Proceeds to the monthly payments for the units
- Completion of purchase
Benefits of TPS
TPS as a home ownership option has a number of benefits to the applicant.
- Home Ownership opportunity to different income groups
- Stable housing situation – imagine paying rent to a house you will eventually own! Negotiations on monthly installments and length of tenancy can also be done.
- Potential financial gain – when you decide to resale the property or generate passive income from the property.
- Control over property – as the property will eventually be yours, all ownership rights will belong to you. This allows you to modify and renovate the property.
- Predictable monthly payments – once the TPS agreement is executed, the rental payments agreed are locked unless otherwise considered.
- Asset gain – having an asset to your name that does not depreciate and that you can gain passive income from.
These and many other is the reason why you should consider applying for TPS for home ownership. As an end user financer, we assure the above benefits to all our applicants.
Tips for a successful TPS application
Want your Tenant Purchase application to stand out? We’ve got some tips for you!
- Understand the eligibility criteria and gather all required documents
- Ask questions
- Be honest about your financial situation
- Submit a complete application
- Highlight your tenancy and property of interest
- Express genuine interest
- Seek professional help from experts in the industry
- Submit application early