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Rent-to-Own Australia

Written by

James Bowe

In this guide you’ll learn:

  • The costs of buying a home in Australia
  • What rent-to-own is
  • Who provides rent to own options
  • How rent-to-own works
  • Who rent-to-own is for
  • Where rent-to-own is currently available in Australia

The costs of buying a home in Australia

Median house prices across Australia have soared to over $1,000,000 and for many Australians an eye watering deposit of $200,000 is a seemingly impossible hurdle to overcome.

This dilemma intensifies for the many millennials concentrated in Australia's capital cities, like Sydney, where the median house price has reached $1,600,000, requiring a $320,000 deposit plus $73,300 for stamp duty.

High loan to value ratio products with Lenders Mortgage Insurance offer other options, but can still require a hefty upfront payment.

Find out about the different types of home loans available with Money Matchmaker

What is rent-to-own?

Rent-to-own is an emerging pathway to homeownership in Australia that allows you to live in your home while saving for it. A mature path to homeownership overseas in the United States, Canada, and the United Kingdom- rent-to-own has a long history of helping people into their homes.

As of 2022, Australia has started to see widespread support for this model of homeownership.

First home buyer home loans

An alternative to the traditional renting and saving. Think of it as ‘live now, pay later’. Move immediately into your dream home.

Leave the rental lifestyle behind. 

  • create security
  • safeguard against a runaway property market
  • get onto the property ladder - to enjoy capital gains 
  • and finally - invest in the perfect furniture, get that furry friend, plant a garden, replace the carpet, and even put a nail in the wall! 

No more removalist fees, rental inspections, or unexpected increases in rent.

Read more about the benefits of Rent-to-own

How does rent-to-own work?

The process is simple and can be broken down into 7 steps:

  • Apply — A solid credit score is a must. Another important factor is your annual income (pre-superannuation).
  • Qualify — If you are eligible, you will receive an estimate of your buying power.
  • Verify — Your Income, assets and credit history will  be verified.
  • Pay —Typically you will pay a starter fee, which may be refundable if a property is not found for you
  • Choose —the fun part. Rent-to-own  provide someone to help you find and schedule  houses and inspections that fit your taste and buying power
  • Move in — All the heavy lifting  to purchase the home is done by your service provider. They keep you in the loop and act as your buyer’s agent. Once your home is purchased, you’ll be involved in the  move-in date and exchange of the  keys.
  • Purchase — Each month, part of your monthly payment will go toward building the purchase offset in the home. After a few years, when you exercise your option to buy, this purchase offset will be deducted from your purchase price.
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Capturing upside is an important benefit of the rent-to-own process as the value of real estate regularly increases. Sydney has seen an average growth rate of 8% per annum for the past 70 years. This is great news for those who choose rent-to-own as you will typically benefit from the property’s appreciation.

Who is rent-to-own for?

Approximately 4.5 million Australians between the ages of 18 to 35 don’t own the home they live in, and about 60% of young Australians who manage to purchase their first home receive financial support from “The Bank of Mum and Dad”.

Rent-to-own may be for you if you are an individual, couple, or family that:

  • Doesn’t want to wait and save for a deposit. Or feels that your liquid assets could be put to better use
  • Has a good credit score
  • Doesn’t have parents who can afford to help finance your first home, or doesn’t want to burden them
  • Has a relatively high household income and therefore - good serviceability
  • Is an immigrant on the way to permanent residency or citizenship and wants to avoid a foreigner surcharge purchase duty
  • Are business owners
  • Are directors of loss making entities

Most importantly, rent-to-own is for individuals or families that want to jumpstart their homeownership journey and turn a monthly expense into a long-term investment. 

Where is rent-to-own currently available in Australia?

  • Greater Metropolitan Sydney
  • Wollongong
  • Newcastle/ Central Coast
  • Greater Brisbane
  • Gold Coast
  • Canberra 
  • Coming soon: Vic
Australia

Who are some providers of rent-to-own?

  • OwnHome: Allows you to save for your home while you live in it. You choose any home off the open market, and OwnHome purchases it for you
  • Assemble Communities: Property developer with 3 developments in Victoria. Allows you to purchase your apartment from Assemble at the end of year 5.

About Money.com.au

Money.com.au want to make managing money easy and fun! By giving Australians simple tools so they can make the best decisions they can about their money.

We understand that the world of finance is complex, and offer free, extensive guides on Personal Loans, Car Loans and Business Loans, along with tools like our Budget Planning Spreadsheet to help you better manage and understand personal finance.

About the Author

James Bowe, Co-Founder at OwnHome

James

Bowe

James Bowe

James is the Co-Founder at OwnHome whose mission is to turn renters into homeowners. OwnHome allows customers without deposits, to save towards their home while they live in it.

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