No bond? All is not lost

2012-06-02 10:16

Rent to buy is a new concept of home ownership that offers consumers an opportunity to prove their ability to afford a home before buying.

An increase in negative credit listings and tighter lending by the banks make it difficult to qualify for a home loan.

According to latest figures by bond originator ooba, more than 30% of mortgage applications are turned down either due to affordability or a poor credit history.

The concept behind rent to buy is that a potential home owner can rent a home with an agreement to buy the property once they have established a track record.

If a consumer is able to rent the property first and demonstrate the ability to meet not only the repayments but also levies and insurance, then they are in a stronger position to apply for a mortgage from the bank.

From a seller’s point of view rent to buy offers a potential market as it is harder to find qualified buyers.

The seller is assured of a selling price for the property in the future, while the buyer pays rent approximately equal to the buyer’s future bond repayment.

The buyer also takes over the responsibility of the property – including all rates, taxes, levies and maintenance – which would apply if he was the home owner.

Meyer de Waal, the founder of Rent2Buy, says sellers are usually property developers with excess units, distressed owners or investors in buy-to-let positions, who have over committed themselves.

“The market is opening up to the concept of renting to buy,” says De Waal.

“We do not accept every client, but we look at the affordability and behaviour of that particular client.

“We take clients who have been declined by the bank because of minor problems like a poor credit record or affordability problem and put them on a budget fitness programme,” says De Waal.

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