Rent to buy properties is one of the most popular schemes in Australia. For people unable to get bank loans or finance from other organizations, rent to buy program helps in establishing a good credit history. Owning a house or property in Australia is one of the most cherished dreams for any Australian. Through this program, many people are able to meet their financial goals.
What is rent to buy option?
Rent to buy properties is an option wherein you stay on rental basis initially and when conditions are favourable, you buy the same property. Initially a lease option agreement is signed between the tenant and the owner of the property. In case of buying the property at a future date, an agreement is made to buy the property at an agreed date and at a fixed price. The purchase price is fixed during the signing of the legal documents. The sale price of the house gets locked at this time. It can not be changed irrespective of the value of the property in future. An amount called ‘Option Fee’ is paid to the seller. This option fee is non-refundable in case the buyer decides not to buy the property in future from the seller. Once the option fee is paid, the seller has to sell the property to the buyer at the agreed time frame and at the agreed price. This is provided the tenancy agreement has been duly met. During the lease period, the rent payments are made as per rental terms and whatever credit balance is there, that will be adjusted towards the purchase amount. The exact details of buying the property at a future date are carried out in the tenancy agreement.
What are the advantages of rent to buy?
In the rent to buy properties scheme there is less involvement of paper work. It is much faster as compared to bank loans or loans from other finance companies. Only approval of the seller is required for buying the property. The major advantage while going for rent to buy properties scheme is that the purchase price is fixed at the time of signing the legal documents of the lease agreement and can not be changed irrespective of the value of the property in future. When market conditions are dull, the price of properties tends to fall down. In case a buyer goes for this option during slack market conditions, the buying price would be quite low. Once the purchase price is agreed upon by both the parties, the price gets locked and can not be changed in future even though the markets start doing well. Obviously, the benefit is passed on to the buyer. Moreover, in this scheme, there is an option of not buying the property in future. You can vacate the house at any time. In this case only the option fee amount is lost unlike bank loans, wherein you tend to lose your stamp duty and other payments. Rent to buy properties is one of the best ways to establish a sound credit history in case you are unable to get loans from other organizations.