The increasing interest rates on home loans and the soaring prices of homes have resulted in people seeking alternative ways to own homes using rent to buy schemes from non-banking lenders.  Banks have strict eligibility criteria for borrowers which such as a high credit score, a huge down payment, a regular income and a stable job.  The rent to buy lenders offer rent to buy schemes as solutions enabling the aspiring home buyers with easy terms to own homes in stages.  

People who do not have enough savings to make a down payment towards a traditional home mortgage or those who have issues with their credit history, those who do not show proof of income or those who are self employed.  People who have become new citizens of Australia and those who cannot make a big down payment choose to use the rent to buy schemes as it fulfils their dream of owning a home with the help of the non-banking lenders or using vendor finance.  Rent to buy scheme may appeal to you if you change job often or have been through divorce or too young or too old to be eligible for traditional home financing.

Under the rent to buy scheme you can select the home that suits your requirements after searching online through the houses available.  You can rent a house and pay rent, but pay an additional rent premium towards the purchase price of the house. This price is fixed till the agreed future date of purchase.  You also pay a one time non-refundable fee called the Option fee which is the fee for exercising the rent to buy option.  Once you sign the agreement you can occupy the house and make improvements and maintain it. While renting the house you can also improve your credit score and manage income with the confidence of being able to buy the house at a future date.  When you are ready with your finance arrangements for the house purchase, you should inform the landlord at least 3 months in advance.  You can have a solicitor or conveyancer to complete the formalities.  You become the owner of the house and end the rent to buy scheme contract you have signed.  If you change your mind and decide not to buy the house but the seller has to sell it to you only after he signs the agreement.  If you end the contract before its expiry you forfeit the option fee and the additional rent premiums you have paid.  

However to avoid getting into a scam, take these precautions:

• You must have an independent attorney to check the agreement before you sign it.  
• Inspect the property and satisfy if the property has all the details contained in the contract.
• Compare the price with other similar properties and the rent.
• Pay attention to the terms of the contract and clear doubts if any before signing.
• You must consult an independent legal and financial advisor to make sure the rent to buy scheme is not a scam.

Though the rent to buy schemes seem to be very attractive, caution must be exercised to enjoy the home ownership with peace of mind.