If you are thinking about buying a home, a rent to buy might be an option you’re interested in. The big pro is that this can be a way to buy a home sooner, rather than later, because you can get into your own home without having to save for forever for your down payment. But there are some cons to be aware of as well…
No Down Payment Home Buying
Buying a home is a monumental occasion but for many Australians, saving the down payment is no easy feat. That’s why many people look at rent to buy schemes. While it’s true that this offers you a way to buy a home without a down payment, there are some potential drawbacks to consider:
- High rent payments. One of the ways the rent to buy typically works is that you pay a higher rental fee and part of that fee goes toward your down payment. You’ll typically pay that high rent until enough has been saved and then convert to a mortgage payment.
- Home costs are generally higher. Some homeowners make their home available as a rent to buy so that they can sell the home for a higher price. You could wind up payment substantially more than the home is worth.
- It can take a long time before the home is transferred to a mortgage and if things go awry, you could lose out on all the extra money you’ve invested.
Before doing a rent to buy scheme, be very careful that you aren’t taking on a deal that’s not worthwhile. Sure, there could be a slight premium attached to a deal where you’ll benefit by not having to save a down payment but be sure that you have your lawyer carefully review the deal so you can be sure that it’s not something you’ll later regret.
There are some low or no down payment options for very qualified buyers. And if you spend a good six months to a year making sure your credit rating looks good while saving for as much of a down payment as you can afford, you could find that the options that open up are much better of an investment. Regardless of the path you take, be sure to get informed and always obtain legal advice before signing a real estate contract.