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  1. #11
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    A true rent-to-own is an instalment contract, meaning you pay it off o^er time.

    the only good thing I can think of is that the house may appreciate in that time.

    I still think the price is likely to be inflated or a houses that may not be able to be sold easily. Why would you sell a house at a fixed price for a reasonable rent in the meantime, if you could just do a straight sale?

    My biggest concern is that what happens if you pay a whole load of instalments, and then the seller loses the house. Traditionally, instalment contracts were clear title, meaning that the seller didn't ha^e a mortgage. I don't think that's the case anymore. So if the seller's bank has first mortgage and the seller defaults, then the bank sells it. And they don't ha^e to sell it to you. In fact, they are unlikely to sell it to you as they ha^e to go through the motions of ad^ertising and finding the best possible price.

    So, if it was a reasonable price (need independent ^aluation), reasonable rent, clear title, properly drafted contract, and the seller agreed to a ca^eat on the property to protect to gi^e notice of your interest in the title, then it might be okay. Not sure how many deals there are like that though.

    Again, get independent legal ad^ice. DO NOT go to a lawyer (or broker or ^aluer) recommended by the rent to own people.

  2. #12
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    Quote Originally Posted by MsMummy View Post
    Is that the neil jenman article? That sums it up well. They rely on the fact that most of these people can never buy the house anyway or will default under the contract.
    Yes that's right.

    I can't find anything positive about them that isn't written by the actually company that doing these schemes.

  3. #13
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    oh awesome thanks for that insite Anushka it certantly gives me some things to think about I have always been taught if it seems to good to be true then it usualy is! I dont know why I thought this might be different Were in the position that a house in the area we really want to settle in has been on the market for a while and over the last 4 months they have droped the price by 30k which puts it in our budget only problem is we dont have a deposit, we could easyerly afford a 100% loan but you cant do that now with out a garintor which we dont have. Its a very frustrating position.

  4. #14
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    Quote Originally Posted by TurnedBatty View Post
    Well that's the rent 2 buy, what about rent to own. I googles and only came up with good stuff. And I think it's a little obvious that you end up paying more rent, isn't it supposed to be more like paying a mortage then paying rent? I don't know anybody who has a house for under 270 a week, not rent, and definitely not mortage.

    Anushka, are you talking about that annoying guy "Aussie, we"ll save you". We can't get from them either. Our only option now is bad finance or credit home loans.
    Well it's up to you, talk to a lawyer one that you choose like msmummy said.

    You can't get a loan because you have bad credit?
    If that's the case I would be working on your credit, either paying the debts of or not paying them off and waiting your 5 years or how ever long you still have left.

    In the meantime saving like crazy for a deposit, that way YOU are in control. You can choose your bank, get a better interest rate, and negotiate on the price of your home.

    Your home is your greatest investment so be careful.

  5. #15
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    Quote Originally Posted by kath87 View Post
    oh awesome thanks for that insite Anushka it certantly gives me some things to think about I have always been taught if it seems to good to be true then it usualy is! I dont know why I thought this might be different Were in the position that a house in the area we really want to settle in has been on the market for a while and over the last 4 months they have droped the price by 30k which puts it in our budget only problem is we dont have a deposit, we could easyerly afford a 100% loan but you cant do that now with out a garintor which we dont have. Its a very frustrating position.
    Sometimes you need a very little deposit maybe just 5%. Can you borrow of family? If it's your first property you will still get 7k plus a few thousand you save,might be able to shop around and find someone who will lend you money if you have a decent income and good credit rating.

    Sometimes it's better to wait even just a year or 2 if that means saving yourself thousands in the long run.

  6. #16
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    i would suggest going to a broker ( if you are in brisbane i can give you a great one). they can tell you what kind of loans are avaialble etc but also can tell you what you need to do to be able to get a loan as well. we did that, saw him first to get an idea of what i needed to do, then when we had what we needed ( for us the double homeowners grant and a small loan from fam) we saw him again and he did all the hard work for us - he was brilliant!

  7. #17
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    Default Rent to Buy and Instalment Contract

    We live in a rent to buy/lease option house and have done so for the last seven years. The house before this was also on a rent to buy/lease option and we lived in that one for five years. We made $120,000 in the last house because there was a huge spike in capital growth in the area. We sold that property and moved into another rent to buy.

    There is actually quite a difference between a lease option (which is what you call a rent to own or a rent to buy) and an instalment contract.
    The use of instalment contracts and lease options to purchase homes is a great way for people to get into home ownership when the banking system is not an available option to them. It is usually a lack of deposit that makes it difficult for people to get a loan to buy a house.

    A rent to buy/lease option is made up of two documents that is a residential lease and an option to purchase. The residential lease allows you to live in the property and the option to purchase gives you the right to buy the property any time during the timeframe allocated for the lease option.
    An instalment contract is completely different. The instalment contract is governed by the National consumer credit protection act 2010 and for somebody to sell your house or instalment contract they must be a registered credit provider (as is your local bank). They have to work completed a course in qualifying people for their properties and also be a member of an external dispute resolution scheme.

    An instalment contract is made up of three separate parts that are joined together. The first is a pre-contractual agreement (the same as you would get with a mortgage from a bank) that stipulates the amount of finance, the repayments, how the interest is calculated, any fees and charges, and other information relating to repaying the loan. The second part is a standard contract of sale for your state in which the details of the purchase price, the deposit and settlement date are inserted as you would normally see from a real estate agent. The difference is an instalment contract can run up to 30 years whereas a contract with the local agent will only run for 30 to 90 days as a rule. The third part is special terms and conditions relating to your loan on the property. These special terms and conditions contained such things as how your payment is made up, the default and termination process, how the rates and insurance are paid, who plays the maintenance, any first home owners grant is available and much more.

    If you are going to purchase a home on either of these sorts of schemes you need to do some homework. Neither of these purchase arrangements will see your name on title until such time as you get your own bank loan sometime down the track and payout the vendor. Both these sorts of paperwork allow you to put a caveat on the title to show you have a financial interest. The process for both of them is very similar in that you make your weekly payment on your house and as with a bank loan a little bit comes off the price of the house and most of it is interest (with lease options they call it different things).

    You need to be careful in entering into these contracts.

    You need to ensure that the property price is reasonable – it is a common misconception that they are all grossly overpriced – but you do need to do your homework by checking local real estate agent windows were comparable listings to ensure that the house is of a reasonable price.

    You need to ensure that the payment that you are paying on a weekly basis is not more than you would be paying if you had a bank loan for that amount. Keep in mind there is usually a higher interest rate with instalment contracts as they are more like nonconforming loans. You will usually pay 1.5% to 2% more than the big four banks but much less than nonconforming lenders like peppers, bluestone and liberty.

    You need to ensure that the duration of the contract that you enter into is five years or more. Never, never, never sign up for a instalment contract or lease option for less than five years, if you do chances are it will fail. You need at least five years to build up enough equity in the property via your payments and natural capital growth to be able to be sure that you have a good chance of getting a loan to buy the property.

    I myself live in a house that we have purchased a rent to buy/lease option. We have lived here comfortably for seven years, the lease option period is 10 years. In the last 10 years we have paid off over $30,000 (which is comparable to a bank loan if we had one). We will be in a position next year to be able to get a loan to purchase a house from the vendors. We know that not all of these transactions work properly, but arm yourself because there are unscrupulous vendors out there as well is good ones.

    David Siacci


 

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