Renting these days is tough! Trying to find the right place at the right price and securing it before anyone else gets it is hard enough without having to think about the security or holding deposit.
According to ONS data, the average deposit in England and Wales is £1,054. Most of the time you probably won’t have received the deposit on your previous property back before being asked to pay a deposit on the next property. If you’ve ever found yourself in this situation and found yourself resorting to taking loans/credit cards or even borrowing off friends and family then perhaps the ‘lifetime deposit’ is a solution for you.
But what is it? How does it work and is it right for you? Below we give you the low down on everything you need to know.
What are lifetime deposits?
The lifetime deposit is a relatively new concept and was first mentioned in Boris Johnson’s election campaign, before being highlighted in the 2019 Queen’s speech. The idea is quite radical but could be a game-changer for the many thousands of renters out there. In simple terms, the lifetime deposit is a solution that means your deposit moves with you from one tenancy to another. Between moves, you only ever need to top up the pot if there is a difference e.g. the next place you move has a higher deposit amount compared to the place you're leaving.
It’s a win-win for both landlords and tenants. The new landlord doesn’t need to chase for the deposit and the old landlord is able to make sure everything is ship-shape before passing on the deposit to the new landlord. And of course you don’t need to worry about forking out for the entire new deposit, just because the old landlord is holding on to your old deposit for longer than you would like.
How does the Lifetime deposit work in practice?
Whilst the Government has not provided clear guidelines on this yet, the type of thing you can expect is as follows.
- You’ll firstly need to dig out your deposit certificate to show you actually have an existing deposit registered with one of the three UK deposit protection schemes;
- Next up, check you are eligible and apply for the lifetime deposit with an appropriate supplier;
- If eligible, you’re likely to need to pay a one-time fee before the provider pays your deposit to your new letting agent/landlord (in the shape of an interest-free loan). If there’s a difference between deposit values, you may need to top-up at this stage.
- Typically it takes 60-90 days to get your old deposit back after you’ve settled into your new place. Once you have the old one back, you can pay back the interest-free loan.
Are Life time Deposits worth it?
As with any new solution or proposition there are always going to be good bits and bad bits. You just need to weigh up the pros and cons and make the right decision for you. The pros as we see them are:
- Makes moving more affordable - often the barrier to moving is being able to find the deposit in the first place. But with the lifetime deposit the deposit moves with you so there’s no need to put off that moving date any longer!
- No need to save up for a deposit -Normally you’d have to save up and make sure you had the deposit money available for your new property. But with the lifetime deposit you don’t need to - you’ll only need to have funds available if your new deposit is higher than your last one or if your current landlord keeps some back for any damages.
- You're Still Protected - Just like your ‘normal’ deposit is protected by the TDP (tenancy deposit protection), so is your lifetime deposit.
- More Money in your pocket - Of course not having to stump up the cash for a new deposit means you’ll have more cash in your hand to spend on other things - furniture, removal van, or even splash out on a holiday!
And the things you need to be wary of are:
- Not all deposits are equal - So whilst the idea of the lifetime deposit sounds great, just be wary that deposits amounts vary from tenancy to tenancy and you may need to put in more than you had budgeted for.
- Small print - Don’t forget to read the small print - just like deposit insurance schemes providers are likely to charge you for administering and facilitating the lifetime deposit. So don’t think this is totally free!
- Disputes - Whilst the TDP scheme means a landlord can’t withhold your money, it doesn’t mean they can’t make deductions for damage. And if this is disputed then your money is just as tied up as it would have been if you had to go out and find a new deposit for your next property as you do now.
- Not for first time renters - if you’re a first time renter the likelihood of you being able to participate is low. You need to have a deposit in the first place to transfer right?
If you're looking for a lifetime deposit provider we've teamed up with Fronted.
So there you have it - Is it right for you? Let us know your thoughts - DM us on our socials!