Rent to buy high deposit?

Question from mark updated on 10th May 2013:

I am currently doing a rent to buy on a house that I want to buy, for $185,000, the issue is that a Kiwibank manager is telling me that I need 20 to 30% deposit if I am on a rent to buy scheme (otherwise I would only need 5%). Can you tell me why I need more deposit on a rent to buy scheme as I dont understand.

Our expert Kris Pedersen responded:

It may depend on how you have structured the deal or it may just be Kiwibank being conservative. What the bankers will tend to look at is whether you are actually paying above market rent and is the part above the market rent what has built up your deposit amount. If it can be seen to be this way then they may accept it as genuine savings. You may find as well that other banks may still require you to have at least a 10% deposit built up as they still look at scenarios like this as being a bit out of the box. It will also depend on your overall position including how strong you are in regards to servicing, if your credit is clean, if you have outside consumer debt and if you are in stable employment.

Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies.

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