Rent to Buy in New Zealand - how feasable is it?

Question

Moving to NZ and worried about how we will buy a house, get a mortgage etc when we won't have been in our jobs for long. Have kids and don't want to be moving around all the time. Heard about a rent-to-buy scheme where you live in the house you want to purchase for a year, paying rent for 12 months and then after the 12 months you get a mortgage to buy it. Has Anyone done it? Or heard of it? Pros and cons please.

Answer 1

No sweat, the country is geared toward the needs of recent arrivals. I bought a house here within the first few days of arriving. All it took was a 5% downpayment and my work contract. As you will have seen, houses are cheap here, so the risks seem bearable to the banks.
I have not heard about the rent-to own scheme.
Worst case scenario, you may need to rent somewhere for three months, compile pay slips, then buy. Also, the real estate market isn't exactly a rip tide here by comparison with the UK; many houses that are for rent may be for sale if you make an offer. Many Kiwis own a couple of houses and don't mind getting rid of the odd one.

Answer 2

I live in NZ and I know about three people who've been involved in rent-to-buy deals. In my opinion they're a good idea provided you know what you're doing. Do the sums before signing anything and make sure that you'll be able to afford it. You don't own the house until you've made the last payment. If you default, you get no refund on the payments you've already made, and you don't get the house either. The deals we heard about had no 12 month period. The tenants didn't have to pay a deposit. They just made regular fortnightly payments until the house was paid off, then they received title to the house. You should know that about 70% of rent to buy schemes fall through. The tenant defaults on the payment and loses the house. Don't let this put you off though. It's because, since you don't have to pay a deposit, these schemes are attractive to people without much money, and are therefore more likely to default. The most recent rent-to-buy scheme we had anything to do with, the cost of the house was NZ$30 000 or so. That's dirt-cheap even by NZ standards. It was an old house in a poor state of repair, way out in the country. The tenant took possession of it a few months back, after taking about 8 years to pay it off. The seller was a friend of ours. The tenant was late with payments several times. She didn't want to toss him out, even though she was entitled to do so. She was pleased when he finally made the last payment and the house was off her hands. Her previous tenant was a no-hoper who shot through after making about half the payments. He lost several thousand dollars, but she was pissed off because she was left with an unoccupied house that she still had to pay rates on, and she had the hassle of having to find another tenant.

Answer 3

I am a regular traveller to NZ and can't believe how affordable the housing is, both to rent and to buy, especially on the South Island.

My mother moved there in 1980 and bought a place she was renting for very little, so I know it's possible.

I just wish my wife would take the view I have so that we could move from the UK where I pay a large chunk of my wages out to support those who have no intention of working. Unfortunately she won't leave her mother, so I can't go where there are much better opportunities for our children.