Rent to Buy Homes Blog

Rent To Buy - How It Works

Increasing property prices and stringent mortgage terms imposed by financial institutions tend to scare prospective home buyers away from their decision to purchase a new property.

At this point of time, significant deposits are also required. The banks limit their risk by insisting on a sizable investment as a deposit by the borrower and this has made it even harder for people to own a new property. You may be earning a good amount as salary which would make it easy for you to make your monthly instalments towards your mortgage but what about the deposit? How long would you save towards accumulating a good amount before you could enter that new dream home of yours?

The good news is that this situation has led to the growing popularity of the rent to buy home deal. When difficult situations arise in any market, there are always alternatives that come up and renting the same property that you want to buy a couple of years later can be a very appealing option.

What is Rent to Buy?

Rent to buy or rent to own is an option open to those who want to own their dream home but don’t have enough resources to pay the upfront costs that are required by the financial institutions to lend you the cost of the new property.

By renting a new home with the long term plan to own it in due course, you will see the following benefits:

•    You can start living in a new property and you purchase it after renting it for a specific period depending on the agreement with the property owner
•    You pay an extra amount that is added to your rent which is adjusted towards your deposit at the time of purchase. This is very helpful as over the time of renting a significant amount of money builds up (your initial deposit on renting as well as the amount accumulated over the years). At the end of the agreement period when you are ready to purchase and approach a lender for finance, this is used as your deposit.
•    Rent to own option really makes the transition period between renting and buying much simpler and hassle-free as you are already settled into the home of your choice.

How to Buy a House in NZ Using Rent to Buy

Once you decide you want to utilise rent to buy to get into a home, approach a rent to buy specialist such as ourselves to discuss the ins and outs of the process in more detail and to help you find an investor. The investor will buy the property and then you rent to buy the property from them.

Once you are certain this is the way you should go, then all you have to do is find your dream home! Contact your real estate agent and choose the area you want to own your new property. The agent then arranges for a viewing of the same and if you think you have finally found your dream home, then let your rent to buy specialist know. Once all the paperwork is done (the house is purchased by investor, your rent to buy agreement is completed – a rent to buy is normally a 3-5 year rental period prior to buying) you are now the proud occupant of the new property which you may decide to purchase at the end of or within the agreed rent to buy period.

If you would like to find out more about the rent to buy process, please contact us today for a no obligation discussion.

Rent to Buy Homes and Bank Lending

The rent to buy homes concept has become more and more popular over the years. With high bank interest rates, economic slowdown and escalating house prices, the affordability of many aspiring home buyers to have their own home is becoming a distant reality.

The finance you get from banks and other financial institutions for buying your dream home in New Zealand may be considered the most beneficial in several ways but there are a lot of factors that control this type of lending.

One thing that is often a barrier for people when it comes to bank financing is the large initial amount you need to have which is often 20% of the total loan amount. Not all those who aspire to live in their own homes can afford this. There may be several reasons for this such as:

•    You are not able to afford a 20% down payment towards the initial deposit as a prerequisite to the housing finance offered by your bank
•    You are new in New Zealand and are not in a position to invest a large amount in a property
•    You are expecting some large funds in the near future
•    Your money has been invested elsewhere, so a large amount as deposit is impossible right now
•    You have had some bad experiences before in the real estate market and/or have a poor credit history
•    You went bankrupt and are slowly getting back on track, so it would take a long time before you could think of another investment

Use Rent to Own Homes to Get into Property and Build Up a Home Loan Deposit

For some it seems that buying a property has become a far-fetched dream in today’s world mainly because of the stringent measures imposed by banks and the large down payment they insist upon to grant you a home loan. However, there are other ways. The rent to buy homes concept is fast becoming appealing to more and more people because it offers many benefits such as these:

•    You need only 3-5% of the original cost of your new home to start with as against the 20-25% required for a bank loan
•    You get to start living in your new home today and a mortgage comes later
•    You pay your rent plus an additional amount that would be a contribution towards a saving for the deposit you would be giving your lender at the time of purchasing the property
•    You are able to build a successful track record of paying your utility bills, rent and council tax (you have anywhere between 3 and 24 months before you make a purchase based on your agreement) thus    creating a good credit score which will stand you in good stead at the time of applying for finance
•    You will get to know if you have chosen the right property to live in  
•    You have all the time in the world to check if all the legalities are in place

Therefore, if you are looking to move into your first home, rent to buy homes could be a great option for you. As always we recommend you do your due diligence and speak with one of our specialists today. Click here to book a free assessment meeting

Get Started In Property With Rent to Buy Homes

With high student loans, an extremely buoyant property market and the requirement for a high deposit, it is not surprising that rent to own homes are on the increase. People desire to live in their own home and enjoy the many benefits associated with that experience. Rent to buy homes are a great way to achieve this. 

Rent to buy your own home is a simple way to get started in the property market and to own your own home when you haven't got a large deposit, or you are unable to get finance from the bank.

Enjoy the Benefits of Rent to Buy Homes

Many rent to own buyers are able to immediately enjoy the benefits of owning their own home. For many this is particularly useful if they are looking to create a permanent family home.

Others have enjoyed the ability to start on the investment path by renovating or improving a home that they buy using the rent to buy process. These improvements add additional value to the property. This in turn means that in time, they benefit from capital gains and equity associated with the renovations.

Understanding the Process and Commitments of Rent to Buy Homes

Its important that those looking to utilise the rent to buy process take steps to understand their commitments to weekly rents and make sure they can afford the rent on an ongoing basis.

During different property cycles , rent to buy homes have different advantages. When the market is low you can often tend to be able to buy at a lower rental rate and the potential capital growth over the long term is good.

When the market is high it is harder to get a low price as the vendor has the option to sell reasonably easily on the open market, however in a buoyant market the tenant buyer has the ability to make quicker capital gains especially if they are renovating the property after moving in.

Its important to understand that as with all property sales, the negotiation must be a win/win situation for both the rent to buy purchaser and the rent to buy seller.

Ensure you have independent valuations, are aware of the property's market value and what extra percentage you may be paying for the the rent to buy option.

We highly recommend that you engage a consultant to help you through the rent to buy process. They can meet with you and explain how the process works and show you all figures including your weekly rent commitment. 

If you want to apply for a rent to buy home simply Click here to fill out our application form



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