Rent to buy method is one of the many solutions to home buyers who are denied access to home mortgages by the conventional lenders.  Many Australians go on paying rent for homes as they find it difficult to meet the costs of buying a home. The Real Estate Institute of Australia (REIA) confirms that at least 35.2% of median family incomes are currently put towards mortgage payments.  In this scenario buying a home is really challenging as the agent commissions, stamp duty and other legal costs are simply unaffordable to these aspiring home buyers. On the other hand more and more homes are foreclosed and get added to the homes on sale when there is very low buying interest.  A variety of lenders and mortgage brokers offer personalized home buying solutions to the aspiring home buyers to come out of the rent trap.  The higher rate of interest justifies the fact that the rent to buy method involves more risks than the traditional home loans. There are no-deposit loans and many tailor made programs to suit every individual and circumstances with the ultimate aim of owning the property.

The benefits of owning a home are:

• It serves as a default savings strategy for wealth building
• The loan will be fully paid and payment stops at some point as against renting which never stops.
• No capital gains tax to pay at the time of selling the property.
• Most people can write off their mortgage interest in their tax returns. This savings makes it more affordable to buy a home.

The rent to buy method is a good choice as it is a short time arrangement till the buyer becomes eligible for a normal home loan.  It is usually five years or less based on his/her credit rating.  There are other tax benefits too which he can use to pay off his home.  The seller as well as the buyer can benefit from the rent to buy method as the contract is structured in such a way that it is the best solution available to both of them.  The lease part of the agreement allows the buyer to occupy the house and pay rent and the other part option gives the tenant the right but not obligation to buy the property.  The higher interest rate is worth as the rent to buy method leads to buying the house and the tenant can modify or make improvements to the house.

It is better to get an independent solicitor to handle the paperwork of the rent to buy agreement.  Both parties should abide by the contract rules upon signing it.  The rent to buy method enables the buyer to help the home owner who might otherwise have the home foreclosed by the mortgage lender thereby helping each other.  If both the parties adhere to the agreement of the rent to buy method the process will end with the home bought by the tenant and the seller gets the money agreed upon in full thus ending in a win-win situation for both.