The National Credit Act has made it difficult for potential home owners to get the loans they need to finance the purchase of a new property. This inability to get a loan makes it more difficult for these people to enter the housing market. Both first time buyers and the self-employed are particularly affected by the Act. Reports show that close to 50 percent of employed bond applicants are declined each month. An even more startling statistic is the 58 percent of self-employed applicants who are denied home loans.
A new concept is revolutionizing the South African property market. The introduction of a new Rent2Buy program in the area will provide buyers and sellers with an alternative way to conduct transactions. Meyer de Wall is the founder of Rent2Buy as well as a practicing attorney. According to De Wall, “We negotiate agreements between potential buyers and sellers whereby the buyer concludes a rental agreement with a seller with an option to purchase the property by a certain date and at an agreed price.”
Rent2Buy works by assuring the seller a set price for the property in the future. The buyer of the property pays rent in an amount that is approximately equal to the buyer’s future bond repayment. A unique aspect of the rent to buy transaction is that buyers are able to take immediate ownership of the property. Because they are taking over responsibility for the property, they are able to treat the home like it is their own and make changes accordingly. They will also be responsible for any rates, taxes, levies and maintenance.
“The idea is that the buyer uses the option period of the contract to prove his affordability and creditworthiness to the bank,” De Wall explains. “This way the buyer can eventually secure a loan to purchase the property. In addition to using the time to save for a deposit, he also shows he can afford the property and be disciplined by paying rent regularly and on time.”
Rent2Buy launched a home owner education programme with the goal of training and mentoring bond applicants and helping them succeed at securing a home loan. The My Budget Fitness programme will improve an applicant’s credit rating and put him on the path to being financially fit for a loan.
The programme was developed in association with Solly Molefe of Setsmol Training. “The programme is unique as it assigns personal budget trainers to applicants and uses innovative software to help home loan applicants track their progress and reach a financially fit state,” Molefe says. “Through mentorship, education and month-by-month guidance, home loan applicants reach affordability and clear their credit record as required under the National Credit Act.”
The My Budget Fitness Programme is available to anyone looking to secure a home loan, not just Rent2Buy customers. The hope is that allowing everyone access to this type of program will improve the ability of anyone seeking a home loan to achieve their goal of being financially fit to be approved for a bond.
Due to the amount of unsold properties in Spain coupled with falling home prices, Connells Group is to market thousands of heavily discounted Spanish properties.
Connells is partnering with Mediterranean CAM, the property branch of the Spanish savings bank CAM.
The rent to buy program will give buyers the option to rent a property for up to seven years. If the renter decides to purchase the property in the first two years, all the rent paid may be deducted from the purchase price.
In addition to the rent to buy option, buyers will have access to 90% mortgages through CAM.
According to Stuart Flavell, Connells chief executive: “We are delighted to have been chosen by Mediterranean CAM to market properties abroad. CAM Bank is the fourth-biggest savings bank in Spain and is an important financial institution with an impressive track record.
“Now is a great time to purchase a Spanish property and we believe there is an increasing number of people looking to buy in this market.
“Our customers can now purchase a property abroad, safe in the knowledge that they have the backing of a recognised and respected UK estate agent, together with guidance and advice from a well-established and successful Spanish Bank.”
To read more, click here.
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The following is a clip from a conversation Jill Schelsinger of CBS Money Watch had with a New York City resident in the newly opened Highline Park on Manhattan’s west side. In the clip, Jill interviews Matt, a young renter who says his primary financial goal is to save to buy a house. He is currently trying to save around $100,000 for a down payment, and has no debt.
When Jill asks, “Does it make sense for you to own something now instead of rent?” he replies, “I don’t know.”
Though people often say that renting is just throwing money out the window, sometimes renting really makes sense. For example: If you are saving for a half a million dollar house that requires a $100,000 down payment, there will be additional costs. On top of the down payment you are going to have a mortgage and insurance, on top of which you will pay taxes as well as any maintenance costs.
Jill recommends going through the exercise of finding out what the comparable rent would be to get pretty much the same thing. If the numbers come out such that owning will be $6000 a month and renting will be $3000, it might not make sense to buy. Keep renting! Jill also points out that sometimes it doesn’t make sense to own if you live in a big city where owning is expensive.
If you use the extra money well, by putting it in savings or in a 401k, then the option to rent makes sense. In this case, Jill says to rent until it doesn’t make financial sense to rent anymore, or when you find something you love and the price differential is not that great.
There is no clear answer to the rent vs. buy question. It all depends on your financial status, where you live, and what your goals are. Jill Schlesinger makes a good point: Owning a home may not be your best bet in every case. To make the most informed decision possible about how to achieve your goals, do a cost comparison between renting and buying, factoring in your own personal financial circumstances. Careful consideration and an open mind will allow you to make the best possible decision.
In Hong Kong, a two-tiered solution to the skyrocketing home prices experienced over the few years has been proposed. The country will stop offering residency to foreigners who buy property. The second part of the proposed changes to Hong Kong’s policy is the implementation of a rent-to-buy program.
The new rent-to-buy program will offer 5,000 units for first-time property buyers. Buyers will able to rent for up to five years before eventually purchasing.
Cusson Leung, a Hong Kong-based analyst at Credit Suisse Group AG, commented that “many of the policies announced today may have only limited impact on the property market in the near term.”
“Take the rent-to-buy scheme,” said Leung, “a lot can still happen over the next few years.”
The rent-to-buy program will let first-time property owners rent a house for up to five years at a fixed rental cost. Half of the total rent paid during the rental period will be put towards a down payment to buy the home.
According to Wong Leung-sing, a research director at Centaline, Hong Kong’s biggest privately-held property broker, “These are good measures..I think this whole policy address is a move in the right direction.”
The first stage of the project is scheduled to be completed by 2014, and will include 1,000 units in the Tsing Yi district. Officials hope the new rent-to-buy initiative, coupled with a cease in residency offers to foreigners buying property will cool home prices and allow the housing market to settle. Only time will tell.
To read the original article on Bloomberg, click here.
In September, a Waterford house builder held a first-time buyers’ event that was wildly successful. The event, held at the Greenfields development on the Old Tramore Road was packed with visitors. New-home buyers were offered purchasing help and mortgage advice.
The event also marked the launch of the new rent2buy program by Frisby Homes. The rent2buy initiative helps people buy a home by allowing them to rent it for a few years and then buying it after the prearranged time-period with an accumulated deposit.
Sylvia Doyle, sales manager, said that “feedback for the rent2buy scheme was also very positive.” Doyle reported that “two buyers bought using it. They like the idea of renting, but without the ‘dead’ money. It’s also easy to use and buyers don’t need a 100 per cent mortgage.”
To read the original article in Waterford Today, click here.