Even though Australia is considered among one of the most developed countries it has been having a serious problem in the recent times with housing affordability. Australia is not building enough affordable houses to meet the demands of its own citizens, let alone the people who come to the country temporarily. This has been not only because of the fact that overall living expenses in the country have gone up but because of increasing interest rates which means that lesser people find it possible to afford the purchase of a home.

The official figures present a grim picture. According to the available information, increasingly fewer housing construction projects saw the commencement of work. There has been a fall of 3.3% as compared to the quarter that just passed. Shane Oliver from AMP Capital Investors has bad news to share. Oliver tells that while there is some demand, the supply in the housing sector has been rapidly diminishing since the onslaught of increasing interest rates. Home construction in Australia has become ill affordable. The degree of affordability has never before been so low.

Oliver says that the country is building anywhere between 30,000 to 40,000 houses short of what is actually required to sustain current levels of housing access. This is because of high rates of interest with people find it harder and harder to even commence the construction work of their homes. Completing the construction work is a complete new story. To a certain extent the blame for this fiasco also lies on the carelessly planned and improperly implemented policies of the Federal, State and local governments. Higher interest rates are also coupled with irrational taxation regimes.

In a number of cases, the taxes are so high that people are increasingly paying a huge chunk of their income as property taxes. City councils are increasing taxes and people who plan to buy their first home are hit really hard. In Brisbane for example, the tax structure for apartments was recently revised. In 2009, experts say that some properties may be subject a 700% tax increase. The Lord Mayor of Brisbane however disputes this and says that even in the highest case the tax would not go up by more than 300%!

This kind of policy has decreased the incentive of having own home but the increasing rentals still drive the demand. On the other hand supply is dismal. Getting a home building approval is a really complicated task whereas in a number of countries no such thing as a home building approval has ever been heard of. The housing sector of Australia has seen much better times and has the potential to grow at a faster pace. What is required is the popular, political and entrepreneurial will to get the sector back in order.  Failing this, a serious setback in the overall growth rate of the Australian economy may eventuate.

Rent to buy? Well, what does the term mean? This also known as lease option wherein if you do not have enough money on hands to purchase a property then you could pay a small amount as option money. Rent to buy is the best option for those who cannot afford down payment or not eligible for mortgage. With rising cost of living and mortgage interests most families can only dream of owning a house. Rent to buy can come in aid of these home worthy parties.

The term “lease option” is the technical description for a specific rental agreement allowing the occupant to rent a property for a particular duration of time with the added opportunity to buy it outright at the end of the lease period. Therefore, lease options are often called rent to buy.
How does rent to buy work?

In rent to buy schemes the house is purchased by the lease option provider on your behalf or in co-operation with other landlords. Then you would be allowed to move into that house as renter. At the end of the lease term you will be allowed to purchase the house. To exercise this right, you must pay some additional amount to the landlord; generally more that market rent. You may need to pay a deposit at the commencement of the rent to buy agreement. The amount could be as low as $5,000t. The remaining of the loan sum is divided and paid all through the loan period. Unless the debt is settled fully, the dwelling does not belong to you.

Rental fee
The rental fee that you pay in rent to buy is to some extent higher than what you would pay as a tenant. A component of this extra payment is taken for the option to buy besides the initial amount that you have paid. This entire option sum is cut down from the agreed purchase price if you finally decide to buy the property. This means, some amount of the rent that you pay goes towards building a mortgage deposit for the future. In case you don’t exercise the option, then the cost of increased rental payments is not returned. Nevertheless, it is much better than buying a property that has substantially decreased in value.

First time purchasers
Those purchasing a property for the first time may find this rent to buy more suitable as you would not be required to be eligible for a mortgage. Also it would provide you with ample time to get better your current financial position. Rent to buy is most preferred by people who have limited or poor credit history.
Since rent to buy is a key commitment, ensure that your future plans are integral before signing up the agreement.

Rent to buy homes are a great way to purchase a home in case your financial position is not suitable for outright purchase or a mortgage. But before planning to go in for rent to buy homes you should know the nitty-gritty involved with the method. Rent to buy and rent to own are the two most frequently used expressions that refer to a lease option. The term “rent to own” is used mainly in the United States and “rent to buy” is mainly used in Australia.   
The principles of rent to buy homes are that the lessee or the tenant can exercise the option to possess the property at the end of the lease period. This process is also known as lease option. In straightforward terms, rent to buy homes mean the leaseholder occupies the property and pays the rent every month. This amount is slightly more than the typical rent and at the end of the lease period that tenant can use the option to buy the house.
Rent to buy homes are by and large for people with poor or with imperfect credit histories. This opportunity is not possible in mortgages as it is an elaborate procedure.
Those facing a shortage of cash but still wanting to be the owner of a home can opt for rent to buy homes. All they need to do is to shell out a very small deposit (sometimes as low as 0.2% of the property price) and the rest of the amount is divided and paid during the agreement period. Yet another benefit is that the lessee gets to occupy the property. But bear in mind that the property does not belong to the leaseholder until he/she pays up the full amount.
Usually the option money is placed somewhere between three and five per cent of the purchase price. There is a difference between up front deposit and option money. The deposit is usually non-refundable as well as the weekly option contribution. In simple terms, if you decide not to buy the property at the end of the lease tenure it will not be refunded.
Before entering into any such agreement ensure that you will be able to afford the mortgage payments when you conclude your agreement period otherwise all the investment you have made thus far goes wasted.
While it is a good idea that you’re monthly rents include a part of the option money you will have to be sure that you can come up with the money for the monthly instalments without fail otherwise you may lose your opportunity of home ownership.
Given that you could end up owning the house, take care of the property as if it was your own. It is your sense of duty to protect the house, make enhancements, so that its market value increases which in turn will make refinancing of the property all the much easier.
Finally, apply for loans well in advance. Remember that rent to buy homes are qualified for refinance loans. Ensure that your rent to buy provider uses a third party to handle your payments so as the whole agreement is seen as transparent to any bank looking to refinance you in the future.

How Vendor Finance Works

Vendor Finance takes place when the vendor (usually, but not always the owner of the property) offers finance to the buyer. They help buyers realise the dream of home ownership by enabling them enter in to agreement for a property purchase by helping them into a loan. Vendors can lend up to 80% of the purchase price to the buyers and in some cases can lend up to 100% of the property value.

In the case of Vendor Finance, vendors charge interest at a higher rate than the market interest rate which is a standard practice in the finance industry. The buyer makes the payment to the vendor and whatever is in excess, would be the vendor’s income. In many cases the vendor would seek an initial advance payment or initial deposit from the buyer to secure their interest in the property which in many cases be as low as $5,000.

Repayments in Vendor Finance

Vendor finance repayments are usually higher than a normal bank loan. This is due to the higher risk which the vendors associate themselves with. The buyer usually pays interest at maybe 1% more than the market rate to the vendor. The property remains in the hands of the vendor only unless and until the buyer pays off the entire amount to the vendor or the buyer refinances with another financial institution (this is more common and in many cases, encouraged). Legal title remains with the vendor whereas the buyer receives equitable title.

In all cases the buyer and vendor agree to certain terms and conditions before entering into an agreement. It is better to consider all the pros and cons including the conditions of what would happen in the case of late payment or default of payment. In a case where the buyer is not able to repay on time due to some problems then the vendor can terminate the contract. In such cases, the buyer does not get their money which has been paid to the vendor. The vendor may place the property with another buyer.

It is imperative that you understand fully the agreement before entering in to Vendor Finance or Vendor Finance Agreement. Vendor Finance is legal and one of the easy options available to buyers finding difficulty in getting finance through other institutions.