What’s a Rent to Buy?

OPM does not do Rent to Buy in Victoria

With ever increasing real estate prices, many hopeful home owners are stuck renting as they experience difficulties securing home finance as they don’t pass the bank’s strict lending criteria and others, simply can not afford a large cash deposit. Rent to Buy systems can be a very effective tool for potential home buyers.

Rent-to-own is a long-established technique for helping people purchase property and is becoming increasingly popular as house prices spiral upwards. Put simply, rent-to-own allows you to rent your home whilst you are also paying it off.

There are major benefits to house purchasers using a rent-to-buy system:

* Any accrued equity in the house price belongs to the purchaser, which isn’t the case for people who rent as it is the landlord who benefits from increasing house prices.

* Rent to buy plans are normally established with small deposits and some do not even require a deposit.

* Rent to buy purchasers are able to decorate the house without the previous consent of the landlord.

Self-employed individuals, new citizens to Australia, those who do not have a valid savings record and those with past credit issues are able to become home owners through rent-to-buy plans.

An example of rent-to-buy follows; a purchaser rents a house at $550 per week for five years and simultaneously pays a small weekly amount to the owner towards that builds equity in the home should you buy. After five years the agreed price of the house minus the accrued equity is paid to the owner through external finance and the house ownership is transferred to the buyer.

*The amount still outstanding to the seller is the agreed price of the property less deductions made for agreed applied equity credits.

Extra Note: Full Stamp Duty is payable in Victoria 30 days after the Rent to Buy paperwork is signed. This is Victoria only, in the other states, stamp duty is not payable by the purchaser until the title transfers.