How do rent-to-buy schemes work?

Question from theresa davidson updated on 19th September 2008:

We have currently have an investment property, and have been trying to sell it for three years, in Wentworth Falls. We relocated to Brisbane, the house is currently been rented, but it is little under half the mortgage payments. We are currently battling with little over half of the payments and paying rent ourselves. The price of the house has gone down $100,000 in three years so when we sell, it will just be enough to pay the mortgage, leaving no deposit for other house. We have been contacted to sell the house via rent to buy scheme, I have tried to seek info on this, no government body of service can give me info on how they work. I can see a lot of pit falls for buyers in these scheme, but not for sellers. Is there any chance of losing you investment or house with these schemes? I am not sure how anyone can afford to pay as they said my mortgage and save for a deposit in a year and then settle. We can't afford to risk losing a tenant.

Our expert responded:

I really cant answer this for you without looking at the agreement. I suggest you get something in writing which outlines the details of the rent to buy scheme, preferably a copy of a contract and then discuss it with your lawyer. Rent to buy schemes come in all shapes and sizes and some are on the suspect side but not all.

Lisa is a Certified Financial Planner and a director of Acumen Inc, a financial services company offering a full range of services including portfolio management, investment advice, property investment advice and mentoring courses, insurance and mortgages.

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