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.
We have partnered with Fronted* to deliver this option to renters.
What is a lifetime deposit?
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.
For example, the new property you move to has a higher deposit compared to the property you're leaving. You will only pay the difference into your pot.
Why choose a lifetime deposit?
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. More importantly, 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 it work?
Whilst the Government has not provided clear guidelines on this yet, the type of thing you can expect is as follows.
Step 1: Dig out your deposit certificate
You'll need to confirm that you actually have an existing deposit registered with one of the three UK deposit protection schemes;
Step 2: Get your Lifetime Deposit
Next up, check you are eligible and apply for the lifetime deposit with an appropriate supplier;
Step 3: Your Deposit will be paid
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.
Step 4: Repay your balance
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 Lifetime 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 benefits of lifetime deposits 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!
Before you dive in though, we want you to be aware of some things so you can make an informed decision based on your situation:
- 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!
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?
So there you have it - Is it right for you?
Representative example: Based on an amount of credit of £1,000. Term: 90 days.£49.95 upfront fee (fixed). Repayments: 1 repayment of £1,000. Total amount payable: £1,049.95. Interest rate 0% p.a. (fixed). Representative APR 20.3%
*Canopy is a broker and not a lender. This product is provided by Fronted Loans Ltd who are authorised and regulated by the Financial Conduct Authority (FCA No. 933316). Canopy is not associated with Fronted Loans Ltd and may receive a commission from them for introducing you.