How Does Rent2Buy Work?

Your Current Situation

A lot of our clients have come from the rent drain where they have been outlaying their hard earned money for years and getting nothing in return other than accommodation.

We know that you probably understand this and really want to opt out of the rent drain and stop paying someone else's mortgage. But there is something stopping you. Lots of people want to buy their own home but are not able to jump into the property market for numerous reasons…

  • Bankruptcy

  • New immigrants and no credit or job history
  • Businesses or self-employed with less than 2 years trading history

  • Do not like dealing with lenders lack of service or contact
  • Recently changed job and no track record of stable earnings yet.

  • Had the deposit but the market boomed and deposit was no longer enough.
  • Do not have the 20% deposit required to odtain lenders approval.

  • Bad credit history in the past
  • Spent their deposit on something else.

A New Possibility For You

We are specialists who can help you secure your own home through Rent2Buy. Imagine arriving home to a house that is your own. The feelings of security and accomplishment knowing that you now have something that is growing in value. To top it all off, if you want to paint that fence or put in some landscaping and beautification then you can. It is yours!

How Does Rent2Buy Work?

With Rent2Buy, you need a small up-front cash contribution and then you make regular weekly payments (rent).  Depending on how much weekly rent you pay, some of it can pay off the home as you go. This builds up your equity in the property and establishes a savings history which will show the bank you can afford a mortgage. 

Paying weekly rent in a Rent2Buy is similar to a bank mortgage where part of your payments would be interest, and part paying off the principle of the house. The difference is with our Rent2Buy, you are dealing direct with the vendor and the payments can be more flexible than dealing with a bank.

You have the right to buy at the agreed price at any time. There is a legal contract which gives you full control over the property and protects your interests. We advise clients to take a copy of the contract to their lawyer to have it explained and ensure they are happy with it. 

Click here to use Rent2Buy to purchase your new home!

A Rent to Buy,  also known as a Lease Option, allows you to step onto the property ladder today.

Why would a Rent to Buy be the right choice for you?

  • Lack of deposit. Many banks today require up to 20% of the purchase price. It can be extremely difficult to save a deposit that large.
  • Credit Issues. This does not have to be a problem as you have the length of the term (3-5 years) to rectify such issues and be back on track for a loan from the bank.
  • New to New Zealand. Another bank criteria is that you have to be a Resident. Whilst you know this is in the pipe line many like to secure their home today.
  • Self Employed. Giving yourself some time to create the 2 years plus of annual accounts that the banks require.
  • Work History. Again time may be needed to secure a job and have a proven work history for the banks.
  • Divorced or Separated . In this situation circumstances can change over night. It can be a lengthy process to settle the family finances and to divide all assets freeing up capital.

The Benefits of a Rent to buy property:

  • The price is fixed now and can not be changed
  • The Rates and Insurance during your Rent to Buy term are paid by your Investor, NOT you
  • You are able to improve the property your way, if you choose to (with permission)
  • Your deposit is paid back to you as a credit off the end price of the home
  • Each week part of your rent is also accumulated as a credit and paid back to you off the end price of the home
  • This is an absolutely free service for you

A Rent to Buy allows you to choose the home you want to own NOW. The number of years you will Rent to Buy in this home will differ for everyone but is typically between 3 and 5. During this time you are working towards a deposit within the home of 15-20% to be able to obtain a loan from the bank at the end of your term to purchase the house.

This deposit within the home is accumulated over the term of your Rent to Buy in three ways.
  1. Deposit – the initial deposit you pay is credited back to you against the end price of your home
  2. Each week part of your rent is also accumulated as a credit against the end price of your home
  3. Increase in Value through improvements and or market growth

Every person and their situation are unique and the terms of each Rent to Buy are never the same. There is some flexibility in creating a Rent to Buy to suit you.

What do I need to be a Rent to Buy tenant?
  • Deposit between $5000 and $10,000
  • Income to support weekly rent between $400 and $700
  • Desire to own your own home

The table below gives you an indication of what deposit and weekly rent is required for a particular value home.

 

 Deposit

(credited back)


 Weekly Rent

(includes credit)

 Rent Credit

(portion of rent

credited back) 

 

 Property Value

$5000 $400 $65 $200,000
$5000 $450 $85 $230,000
$5000 $500 $85 $250,000
$7000 $525 $100 $270,000
$10,000 $575 $115 $300,000
$10,000 $615 $115 $325,000
$10,000 $675 $135 $350,000

Example

For this example we will use a couple who are able to make weekly payments of $575. They have a deposit saved of $10000 and can start looking for a property on the market around $300,000.

Once they have found a home we work directly with the vendor or agent to get the home under contract. We then find the Investor to take over the Rent to Buy.

We will facilitate all the details of the contract between this couple and the investor. It has been agreed that the Rent to Buy will be for 5 years and the end purchase price for the couple will be $348,000 less accumulated Rent Credits and the deposit initially paid.

From the weekly rent of $575 it is agreed that $115 of this is a Rent Credit. At the end of the 5 years they have built up $29,900 (115 x 52 x 5) along with the $10,000 deposit which is taken off the end purchase price. They only have to pay $308,100 as they have accrued a total of $39,900 that is deducted from the purchase price.

As for the bank, if you calculate now what the value of this home will be worth after the 5 years using the 5% growth rate it comes in at $383,000. This will please the bank as you are only asking to borrow $308,000 effectively providing a deposit of $75,000, or 20%.

End purchase price to you  $348,000 
Less rent credit of $100 per week for 5 years  -$29,900
Less initial deposit -$10,000
Total balance to pay $308,100
For the Bank:
Assumed market value (5% compounded for 5 years)
$383,000
Required Loan $308,000
Equity within the home (deposit) $75,000

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What Are The Advantages Of Rent2Buy?

Your rent money is now working for you!

Every week a portion of your rental payment is credited towards the purchase price of the house. This amount can range from between $25-$150 depending on your requirements and initial cash contribution.

Get into a home with little cost

Normally when you buy a home the bank could ask for 20% down or more by the time you factor in closing costs. When using the Rent2Buy system of buying a house you only pay a 2-3% option fee that is deducted off the purchase price at the time you take up the option to purchase.

Option money is credited towards purchase

When you sign a Rent2Buy contract, you will pay the vendor an option fee. When you decide to buy the home this money will be deducted off the purchase price.  Because you have already paid an option fee and you have been accumulating monthly rent credits, often there is little balance to pay towards your deposit at the time of settlement when you refinance, should you choose to buy.

Profits from appreciation

Since the sales price is locked in, as specified in your agreement, any increase in property value will mean that your equity, what you owe minus what it's worth, is increasing in the home.  You can accelerate this 'equity growth' by making improvements to the property.

No lengthy mortgage approval processes

The landlord/seller is the sole person approving your application and this can be approved in as little as a day or two, instead of a standard lender who can take weeks to approve.

Control of the home and Home Improvements

You have full legal control of the home for a specified period of time without actually having to own it. So you can make improvements, capitalise on subdivision completion or zone changes an natural capital growth.

Don't just take our word for it, Check out Testimonials from our clients

Click here to use Rent2Buy to purchase your new home!

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