Buy a Home

Buying a home of your own is the great Aussie dream for many Australians. But there are many requirements for people to meet to be able to obtain bank finance. There are many Australians who for one reason or another are unable to obtain bank finance at the moment. Fortunately, there are other options other than banks, investors and real estate agents to provide these Australians with home ownership opportunities.

Throughout this section we will be explaining how anyone can obtain home ownership no matter what their circumstances are. 

There are 5 different type of Rent to Buy opportunities which we will explain briefly under the different headings in this section of Buy a Home. Not all Rent to Buy opportunities will suit everyone and their circumstances, but at least one will. Under each heading in this section we will explain what deal type suits that circumstance.

The 5 different Rent to Buy type opportunities that are available are:

1. Lease with the Option to Purchase

This Rent to Buy deal type is like a live in lay-by. The buyer has the freedom to exit and not purchase the property if he/she so chooses at the end of the term. Option paperwork is exchanged (with an unsigned Contract for Sale, an exercise of Option and an assignment of Option all included as attachments to the Option), but settlement does not happen until the end of the term, which usually is between 2 to 7 years. A very small deposit is required for this deal type, often as low as $10. The title of the property does not change over into the new buyers name until settlement (which is the end of the deal). No deposit is needed for this deal type. People with poor credit or who are bankrupt, have no deposit saved or are a new immigrant to Australia, or who are self employed all suit a Lease with the Option to Purchase type deal.

In a Lease with the Option to Purchase not only does the buyer have the opportunity to purchase the property at the end of the term, but also to assign the Option to a third party for a higher price than what he/she exchanged the Option for. If the buyers were to assign the Option to a third party, a new front page of the Contract would be drawn up with the new purchase price. The difference between the buyers Option purchase price and the new third party's assign price would be the buyers profit. The seller would receive what they had agreed upon with the original Lease with the Option to Purchase buyer's.

All of the agreed terms, including the sale price, would be documented into the Option paperwork BEFORE exchange.

2. Wrap (Instalment Terms Contract)

This Rent to Buy deal type is very similar to a Lease with the Option to Purchase. The main difference is that the buyer commits fully to the purchase of the property at the beginning of the deal, there is no exit and the buyer must purchase at the end of the term (or before). Contracts exchange but do not settle for anywhere between 2 to 30 years. The deal becomes a delayed settlement. The length of the term is decided between the seller and the buyer, usually lasting between 2 to 7 years.

The title of the property does not change over into the new buyer's name until settlement (which is the end of the deal). Until settlement occurs, the seller becomes the buyers bank, providing the finance for the deal. A greater deposit is required for a Wrap, usually consisting of the First Home Owners Grant accompanied with a few thousand of the buyer's own savings. The Wrap buyer usually takes over the full mortgage repayments of the seller as well as all expenses, such as rates, insurances, etc. These repayments do come off the purchase price. A Wrap falls under the Uniform Consumer Credit Code.

People with poor credit who are first home buyers, people with poor credit who have purchased property before, people who do not have enough deposit saved to qualify for the banking system, new immigrants to Australia or people who are self employed all suit a Wrap type deal.

3. License to Occupy

This Rent to Buy type deal is similar to a Wrap. Much less deposit is required, Contracts can be exchanged for as little as $10.There is no other adjoining paperwork in a License to Occupy other than a standard Contract for Sale. The sale price is documented in the Contract for Sale (NEVER sign a Contract with a blank sales price). The monthly repayments can be the same as rental payments in the area for similar properties, or the buyer can take over the seller's mortgage repayments in full. This amount is decided upon between the seller and the buyer. Nothing comes off the purchase price unless the buyer pays over and above the agreed repayments (which is documented into the Contract). So the balance owed does not reduce like in a Wrap unless the buyer repays more than what was agreed upon.

In a License to Occupy, the buyer is committed to purchasing the property at the end of the agreed term. This is when the Contracts will settle and the property title will change over into the new buyers name. The buyer should place a caveat on the property's title until settlement, as this documents with the Lands and Titles Office the buyers interest in the property and prevents the seller from on selling the property to another party.

A License to Occupy is a great way to set yourself up in a house purchase while correcting your credit rating, or allowing equity and capital growth to grow in the property sufficiently enough to provide the buyer with a deposit that they might not have had otherwise.

4. Seller funding the Buyer's Deposit

This Rent to Buy type deal actually requires bank finance to be obtained. The seller who is selling using this deal type needs to have at least 25% equity available in the property and be happy to leave some (or all) of this equity behind in the deal to fund the buyers deposit. The new buyer would obtain bank finance for the remainder of the loan and use the sellers equity as his/her deposit. The length of the term usually is between 2 to 7 years, long enough to allow enough capital growth to accumulate in the property to allow the buyer to refinance out the sellers equity that was used as his/her deposit. The seller takes a caveat out on the property until all monies owed to him/her are paid back in full. Usually the buyer pays the seller back in full in one lump sum payment at the end of the term. In this Rent to Buy deal type, the title of the property actually changes over into the new buyers name straight away, within 4 to 6 weeks, at settlement.

People who have no deposit saved (or not enough to meet the banking criteria) but have good credit are perfect for the Seller funding the Buyers Deposit type deal.

5. Tenants in Common

This Rent to buy type deal is perfect for people who cannot afford to pay off a property on their own. They join forces with a group of others (up to 20 people in total) and purchase either equal or unequal shares in a property. Each party borrows an amount in unsecured funds and is committed to paying off their own individual debt. The capital growth that is accumulated in the property is shared as per share in the property. The returns from the capital growth is something that would never have been found through renting alone! The property can either be rented out, or if purchased in a holiday area, time shared as holiday accommodation for the group involved in the purchase. This above scenario could be done time and time again by this same group of people, once everyone has paid off their small debt they could obtain the same debt again and go and purchase another property, etc, etc.

People who do not have the ability to borrow enough money to buy a home of their own, people who do not have the cash flow to sustain covering a mortgage of their own, people on a pension, people who aren't prepared to borrow to the max, etc all suit this Tenant in Common type deal.

Each of these Rent to Buy deal types are different and each provide opportunities to enter into home ownership without needing banks, real estate agents or investors. 

There are many investors out there who offer these same services, our aim is to equip you with the knowledge so you can implement your own home purchase, without needing an investor, a bank, or a real estate agent. You will save yourself tens of thousands of dollars by implementing your own Rent to Buy deal, rather than using the services of an investor. Our new DIY Rent to Buy manual shows you how by going into much greater detail and providing steps of action to take so people can implement these Rent to Buy type deals for themselves.