Rent To Buy

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Many people are finding it difficult to own their own home. A lack of deposit, not being able to make the high repayments on bank loans or being called a credit risk because of a few late mobile phone payments are just a few of the reasons why many people cannot buy their first home.

Rent To Buy helps renters realise their dream of home ownership. It does this by giving renters the chance to build up their deposit while they are renting the property. In fact, renting to buy your home is very similar to a regular rental agreement with one major difference, when you Rent To Buy some of the rent goes towards owning that home!

Also under a Rent to Buy arrangement the future purchase price of the house is fixed when the agreement is signed. So if the value of the property increases over the rent period then that is 100% your gain.  On the other hand, if the value decreases and you decide not to buy, then you can walk away without having to sell a house with the added cost of  selling fees on top of the existing loss and stamp duty you would have paid to buy the property in the first place.

Advantages of a Rent To Buy

Don’t need a 20% deposit to move in.

When purchasing a property under the traditional method using a bank loan, the banks will usually require a substantial deposit of around 20%. On a $350,000 property that’s $70,000! Not many people have that much cash lying around and it can take years to save that much for a deposit, by which time the price of the property might have increased to $400k or higher which means you need a larger deposit which takes more time… and the cycle continues. Under a Rent To Buy program you can move in today with upfront cash of 3-5% so about $10,000 to $18,000 for a $350k property.

You Won’t Be Throwing Your Money Away.

When you spend your money on renting you get nothing in return. When your lease is up you move out and the landlord gets to keep all the rent you’ve paid. Under a Rent To Buy 15-30% of your rent can go towards the purchase price of the property if you choose to buy. Also when you make improvements to the property you get to benefit from them when you buy, rather than walking away and leaving it for the landlord to reap the benefits of your hard work.

Try before you buy.

Under a Rent To Buy you can try before you buy. You can test whether or not the house is a place you can make your home. If it’s not you can just walk away and you’re not stuck with a bank loan that you have to keep making repayments on. If it is you can purchase the property at the price you set today rather than whatever the price is in the future. While you’re deciding, the  payments you make will establish a credit history for when you do decide to purchase.

Disadvantages of a Rent To Buy

Don’t Decide to Buy – Forfeit Any Equity in Property.

With a Rent To Buy it should always be the intention of the owner and the Buyer that the home is sold. The existing owner cannot get out of the contract with the person who is renting to buy unless that person breaks part of the contract.

If the buyer stops paying rent then the owner can remove the buyer just the same as a regular tenant. If the buyer decides that they do not want to purchase the property or doesn’t pay the rent then they do not get back any money that they have invested in the property.

Both the buyer and the seller run the risk that they will change their minds and should understand any contract that they enter into and seek legal advice.

Obtaining Finance to Purchase

Entering into a Rent To Own arrangement does not necessarily guarantee that a particular finance institution will agree to accept those payment histories when assessing you for finance when you eventually decide or are able to exercise you right to buy the property.   This may require you to shop around for a suitable lender or extend the existing agreement until you can meet the requirements of a suitable lender.

Want More Information ??

Some more info available on this site as well Independent Information Site

Frequently asked questions

Can I afford to Rent To Buy?

Under a Rent To Buy your weekly payments are likely to be around $190/week per $100,000 of the property value. So the weekly payment for a $300,000 house would be $190 * 3 = $570 per week. A similar payment as if you purchased the property using a 100% low doc bank loan.

I don’t have a 20% deposit, Can I still purchase using a Rent To Buy?

Yes. You would be surprised how easy it is to get a deposit. Under a Rent To Buy program only a 3-5% deposit is needed. This can usually be got through bond refund, savings and if necessary family/parents.

What happens if I don’t want to buy? Do I get my money back?

No

The intent of a Rent to Buy arrangement is to allow you the time to build equity in the property until you are in a position to do a conventional purchase using a financial institution at the end of the Rent to Own period. If you don’t want to own your own home then don’t enter into a Rent To Buy, continue renting instead.

Can I pay more to build equity faster?

Yes. Usually 100% of the extra payments you make will will be credited off the purchase price.

When can I move in?

As soon as we get the paperwork done.

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