Does HouseMe do rent to buy? It's a question that is asked very often. And whereas the answer is a simple 'no' it's important to understand that rent to buy has a few drawbacks and that alternatives, like finance, may suit people that previously thought rent to buy was their only option.
Rent to buy options for transportable homes are a popular avenue for people to investigate. Finance for transportable units is less well known, even though finance immediately springs to mind when thinking of buying a new car, sofa or TV. It's also very common for the two concepts to be confused as there are large similarities in how they work.
So what is rent to buy, and how is it different from finance?
Rent to buy a transportable home
Rent to buy, or rent to own, is a type of purchase where something like a transportable home is leased in exchange for a weekly or monthly payment. Sounds pretty simple so far. With rent to buy there is the option to buy the property at some stage during the agreement. This is how rent to buy is different from leasing something, as at the end of a lease you have to give back the item. Typically with rent to buy, a person pays a bond and moves in as a tenant paying rent for a period of time, this rent will be higher than normal as it is being used to form a deposit. Once the deposit is in place the tenant buys the unit at the agreed price and becomes the owner. The main catch with Rent to Buy, is the product provider is usually self-funding the lend, and therefore have a far higher interest rate to cover the risk.
Finance for a transportable home
Finance is different in that you're buying something by taking possession of it and paying off the balance (often with interest) over a period of time. The end result is that you've paid a slightly higher amount than the cost of the item, but at the end you own it. The finance is secured against the thing you've taken possession of (in this case a transportable home), so if you can't keep up with the payments the lending company will take back the thing you've bought to recover their costs. Finance is usually with an external Finance company who specialise in lending and therefore have a far lower and more responsible interest rate of 10-12%.
The weirdness of rent to buy
One of the odd concepts around rent to buy is that you're renting a unit at a higher price to save for a deposit. Why not simply rent a transportable unit at a lower cost and save the difference that you would be paying in rent?
Also, at the end of the rent to buy period you buy the unit a previously agreed market price. This is no different to renting a unit for 2 years while saving your own house deposit and then looking to buy when your deposit is saved. The difference with rent to buy is that you're locked into buying the unit you've been living in for 2 years, rather than being able to investigate buying a brand new unit to call home.
The finance future
The above reasons are why a lot of people are looking at finance instead. With finance you need roughly 10% as a deposit. If you meet all the criteria and are approved you could be moving into a unit that you own and, instead of rent, each week you're paying off the loan which gets you closer to owning the unit.
Finance and rent to buy are both governed by the same regulatory bodies - because renting to buy is a form of finance so you'd still have to apply and be eligible for rent to buy much in the same way as you will for finance.
But I want to rent to buy
Bearing in mind rent to buy isn't an option through HouseMe there is a way you can replicate the same system, without doing rent to buy. Firstly, you can set aside 10% of your weekly rent and put that into savings. This represents the extra you could be paying as a rent to buy tenant. At the end of the 2 years that some rent to buy contracts last this 10% extra could instead be your deposit. You'll have that sat in a bank account to use as a deposit to buy a brand new unit on finance. You may decide to use that deposit to buy a house instead, the good thing about not renting to buy is that you have the choice to buy whatever works for you rather than having it locked towards buying the unit you're living in (that's now 2 years old).
Can anyone get transportable home finance?
No, there are criteria that must be met before lending is approved. We believe in responsible finance and will only lend to people who can afford it. With rent to buy, the title still sits with the company, therefore, they are more likely to lend as they have the ability to repossess the product.
Below we have highlighted some of the most common finance requirements, however, please note that there are more that need to be considered.
- A minimum 10% deposit is required upon placing an order.
- You need a stable income and good credit.
- You need to own a house or some land (equity is used as security) to be eligible.
- You must have the landowner's permission to place the unit.
- Finance is not available to people who have their equity in property/land owned by a Trust.
- You are unable to use KiwiSaver and/or Home Start grants to finance your unit.
- You must be working full-time to be eligible.
- Welfare and benefits are not able to be used with finance.
To learn more about HouseMe's finance options, and to apply for finance simply click HERE or on the button below.