Rent to own: The first time buyers guide

A rent-to-own agreement allows you to gradually purchase the home you’re renting. You move in, pay rent, and after a set time — usually five years —you get the option to buy the property. It’s designed to give tenants a shot at homeownership by locking in stable housing and giving them time to save up.

This can be a real lifesaver if saving a big deposit feels impossible or your mortgage applications keep getting rejected. It’s a way to inch closer to owning your dream home without diving straight into mortgage madness.

Rent to own schemes come with various terms and conditions, but here are a few key things they often have in common:

• A five year occupation agreement: this gives you the right to live in the home for up to five years without worrying about the landlord evicting you. 

• A right to purchase: after the occupation agreement period ends you’ll have the right to purchase the home and won’t have to compete with other buyers. You don’t have to though - if you don’t want to or you can’t afford it you’re not required to buy the property. 

• Reduced rent: rent to buy houses often charge lower than market rent to make it easier for tenants to save a deposit. Some even cap rent at 30% of your gross income. 

• Support when buying: most rent to own NZ schemes help buyers get a deposit together and make it easier to get a mortgage. 

• Help with finances: this includes help creating a budget and financial plans and support while they work towards goals. 

Check out rent-to-own listings on Trade Me.

New Zealand rent-to-buy schemes are set up to help people struggling to buy a home the traditional way. To keep things fair, they have rules around how much you can earn and how much debt you can carry.

For example, to be eligible for the Housing Foundation scheme you must: 

Be a New Zealand citizen or permanent resident. 

Not own a home or have purchased a property before. 

Have at least one person in the household in full time employment. 

Have manageable debt that can be paid off in five years. 

Have an income below a certain threshold, usually between $65,000 and $95,000 per year before tax. 

Some rent to own schemes, such as Ka Uruora, even require you to complete a financial education course before signing up. 

Before you grab that pen and sign on the dotted line, let’s make sure renting to buy is right for you. Here are the top questions to consider.

You can. After five years, some rent-to-own programs in New Zealand let you earn capital gains revenue from your home's value increase to help with your deposit. For example, the NZ Housing Foundation gives tenants 25% of how much the property goes up in value after the first five years. So, if you rented a home worth $500,000 and its value grew by 5% each year, you could end up with over $35,000 to put towards buying it.

Many rent-to-buy schemes set aside part of your rent payments to help with your deposit after five years. It’s important to know how much of your rent goes toward that deposit and what happens to that money if you choose not to buy. Also, some schemes charge one-time and regular fees that could come from your rent, so it’s a good idea to find out how much those fees are.

If property prices go down while you're in a rent-to-buy agreement, it can be a bit tricky. Your rent-to-buy price is usually set at the start, so if the market drops, you might end up paying more than what the home is currently worth if you decide to buy it later. However, since you've been renting and building up some equity during that time, you still have a bit of a cushion. It’s a good idea to keep an eye on market trends and talk to your provider about how they handle price changes, just to be prepared for any surprises.

In some cases, the provider will offer shared ownership on top of a rent-to-own scheme. In other words, if you don't have enough to purchase the full property, they’ll finance the rest and give you the chance to buy that portion of the property back from them over time. In most cases, the buyer will need to be able to finance at least 60% of the property’s purchase price. 

If you can’t arrange finance at the end of the five years, you may not be able to buy the home, and in some rare cases, you may even lose the deposit contributions you paid to your provider. To avoid this, it’s best to get an indication of how much you can borrow before you enter into the agreement and make sure you follow your savings goals so that you have enough deposit. 

Calculate your future home costs.

Before signing, find out exactly what happens if you decide to exit the scheme without buying. You’re not going to be forced to buy, but it’s good to understand how that works. For example, what will happen to any deposit contributions you’ve made throughout your tenancy?

Speak to an expert to find out if rent to own is right for you.

1. The Housing Foundation

New Zealand’s largest provider of rent to own properties. A charitable housing trust that started in 2007 and has since helped over 1,000 families into high quality, affordable homes in collaboration with iwi and local government. 

2. Tamaki

A government and Auckland Council-owned entity that provides both rent to own and shared ownership programs to help those who live in the Auckland area stay here - especially Māori and Pasifika.