Rent to buy is basically a scheme wherein you have to pay rent for the home you wish to buy for a set time period, and at the end of the contract’s term, you have the pay the pending amount. Many Australians who wish to own their dream home are curious about it. The main aim of this scheme is to provide access to affordable housing and also to ensure that the houses that are built remain affordable into the future.
Many property developers across Australia give buyers the opportunity to own homes through such schemes, though the number of houses on offer through rent-to-buy are much lower as compared to houses offered on regular sale. Once you find a home you want to purchase through a rent to buy scheme, you sign a contract. You follow this up by paying regular installments for few years, normally 4 to 6 years and at the end of which you have the option to buy the home.
The cost incurred in buying a home through this scheme is comparatively higher than the average rent in the market. Take for example, if the market rent for a home is $800, you might end up paying $600 to $800 as rent and might also have to pay premium in lieu of the potential purchase.
One advantage of rent to buy scheme is that you don’t have to worry about getting a home loan at the early stage and it also provides a way for Australians to buy a home even if they can’t obtain a regular home loan, whether that be due to bad credit, deposit or income reasons.
Before considering this scheme, it’s important to seek professional advice as there can be potential pitfalls to it. Like lack of security, as the buyer’s name is not on the property’s title. Also, if you’re making extra payments and one month you’re late, it might be considered that you’ve voided the whole contract & end up losing all the money you paid.
It’s nothing like buying a property in the standard way, with contracts and legislation in place that protects both the buyer and the seller. Besides, after paying off our regular rents, you’ll still require some kind of finance to make the final payment on your property purchase. That’s not the ideal way to move up the property ladder, is it?
When looking at rent to buy schemes, establish how much of the rent that you pay actually goes towards the value of the property. With a number of rent to buy scheme promoters coming under the hammer, it’s best that you follow due diligence and to know exactly what you’re getting into at the onset.