I'm sick of paying rent and want to buy my first property. I have no deposit and a bad credit rating

Q. I'm sick of paying rent and want to buy my first property. I have no deposit and a bad credit rating. Should I enter into a 'Rent to Own' contract?

A. Short answer is BE CAREFUL!

For those who don't know what a 'Rent to Own' or a WRAP is, let me pass on some pointers:

A Wrapper's client normally is:
 * A first homeowner
 * Without a deposit
 * In possession of a bad credit history
 * Frustrated with their current situation

A Wrapper will then:
 * Become the bank for the client
 * Get a normal rate loan (approx. 7.4%) and pass on a loaded rate (approx. 9.4%)
 * Help them find a property in the area they want to live
 * Purchase (approx. $250,000) and control this property via contract then
  - Re-sell that same property to the client at a loaded price (approx. $290,000)
  - Take the client's First Home Owners Grant as well.

If you are a first home owner and looking at this system, you should ask yourself are you happy that Wrappers will take your first home owners grant, load your interest rate and increase/load your property purchase price.

Remember, that if you miss a payment the Wrapper can exercise their right to cancel the contract, evict you and get another first home owner in and make all that money again.

Paul's tip:
Be careful of WRAPS!
Instead, consider buying a cheap property on your own by educating  yourself, cleaning up your credit file, saving a small deposit and getting a normal loan. As always when getting into property, you need to be in control from day one.

Source: “Ask Paul” which  is a regular feature  provided for Your Investment Property Magazine by Property Secrets where you can ask Paul for his thoughts on any of your property investment queries.


Whether you are looking to buy your first home, move home, refinance, or invest in property, a mortgage broker can help. Access loans from all the major lenders, get help with paperwork – plus there is no charge for this service. Get help from a local mortgage broker

Top Suburbs : artarmon , glendenning , westbrook , keperra , harris park

go back

Get help with your investment property

Do you need help finding the right loan for your investment?

When investing in property, it is important to make sure that you not only have the lowest available rate that you can get, but also have the correct loan features for your needs.

Just fill in a few details below and we'll then arrange for a local Aussie Mortgage Broker to contact you and work out what features or types of loans are right for your needs. We'll even help with the paperwork. Plus and appointment is free.

How soon would you like a mortgage?
What is your Annual Household Income i $
Do you currently own any Investment Properties?
Do you own your own residence?
How much equity do you have in all your current properties?
First Name
Last Name
Where do you live?
What number can we reach you on?
E-mail address
We value your privacy and treat all your information seriously - you can check out our privacy policy here