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Rent To Own Offers Australian Real Estate Buyers A Great Alternative Option

Apr 11, 2008
Everyone needs a place to live. Traditionally, here in Australia, that statement has meant that you simply had one of two choices - rent a place or own one. However, there is now a third option available to you known as rent to own.

What is rent to own?

Typically you either own your home, or at least pay a mortgage payment on it each month as you are paying off your loan from the bank, or you pay your landlord rent on their property that they themselves own. In the first scenario, you eventually own your home free and clear from the bank. Additionally, as each month passes you gain equity, in the form of money, in your property and should you decide to sell it at a later date you walk away with that cash. In the second scenario, you are simply paying rent to allow you to live in the home from month to month. When you are renting you do not gain any equity or interest in the property whatsoever. And, when you choose to move out you have no equity you can cash out and take with you.

In a rent to own scenario you are renting property from the owner, but you are doing so with a portion of your monthly rental payment going towards your down payment on eventually buying the property. Typically, the amount of your down payment credit in a rent to own situation is about 20%-30%. This means that if you pay $1000 per month in rent, then $200-$300 of your payment each month is a credit for your down payment. Using these numbers as an example, then in a year's time you would then have $2,400-$3,600 towards your down payment, which you would not have if you were simply renting. The rent to own credit continues to accrue each month and so you could easily have a nice sized down payment in even just two to three years in this scenario.

Who can take advantage of a rent to own scenario?

The option of renting to own can be taken advantage of by people in a variety of different situations. Perhaps you have less than stellar credit, but you want to own your own home rather than keep throwing your money away in rent each month. Perhaps you are moving for a work related reason and you think that you want to purchase a particular property but are not positive of the area. Perhaps, you just don't have any liquid cash available for a down payment on the property you want to purchase. There are many situations where rent to own makes sense for you as a real estate buyer.

Can someone with bad credit buy a home through the rent to own process?

Many people get into debt with credit cards, or find themselves in over their heads financially for one reason or another. Traditionally, this has meant that they are unable to purchase a home because they are unable to secure a mortgage from a lender. In a rent to own situation, you do not have to secure a mortgage right away and can take some time correcting your negative credit issues while still building up a down payment at the same time.

The reality of life today is that it is hard to get ahead, and it is hard to pay your rent and save for a down payment to purchase a home at the same time. The good news is that renting to own allows you the option of a place to live and the ability to use part of your monthly rent payment towards your down payment all at the same time; rather than tossing away your money in rent each month. You are paying for your place to live and you are building a nice credit for that down payment a lender is going to require in order to lend to you.
About the Author
P.Sharp has been working in Australia's real estate business for the more than 15 years, helping families find and own their dream home. In recent years, he's found rent to own as the best way for families to own homes without impacting their finances.
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