How rent-to-own works in South Africa

So what is rent-to-own, really?

Rent-to-own (you'll also hear rent-to-buy, lease-to-own or lease option) is two agreements that work together. The first is a normal lease: you rent the home and pay rent each month. The second is an option to purchase: a signed promise from the owner that you, and only you, may buy that home at a fixed price before the lease ends.

You're not obliged to buy. You have the right to. That small difference is what makes rent-to-own useful: it gives you time without taking away your choice.

Why does rent-to-own exist?

Because banks lend by checklist. They want payslips going back years, a clean credit record, a deposit and a debt-to-income ratio that fits their model. Plenty of people who pay R15 000 or R20 000 in rent every month, on time, still fail that checklist.

The self-employed builder whose income arrives in lumps. The nurse who went through debt review after a divorce. The young couple who can afford the instalment but haven't saved the deposit yet. Rent-to-own exists for people whose real life is stronger than their paperwork.

What's an option fee?

The option fee is what you pay for the right to buy. With Lease to Buy SA it's a percentage of the purchase price, and it depends on how long you want before you buy:

Here's the important part: when you buy, the whole option fee comes off the price, as long as you kept to your lease. If you decide not to buy, the option fee isn't refunded. That's the trade: it pays the owner for holding the home and the price for you alone.

Your price is fixed on day one

The purchase price is agreed and written into your option before you move in. It doesn't change for the whole lease, even if the market rises.

We'll be straight with you: our price is set 20% above the home's current market value. That premium pays for three things you can't get elsewhere: a price that can't rise for up to five years, the sole right to buy, and an owner who will finance you if a bank still won't. If prices in your area climb over those years, the gap closes in your favour.

Living in it: rent, rates and repairs

While you lease, you live like an owner. Your rent is set 20% above the top of the normal market rent for that home and rises 7% a year. You also pay the rates, levies and day-to-day maintenance, the same costs you'd carry once you own it.

Why higher rent? Because you're getting more than a place to stay: a locked price and a way to own. And because you look after the home as your own, you can renovate with our written approval. When you sell or refinance later, the value your improvements added belongs to you.

Three ways to finish buying

Whenever you're ready, in month two or year five, you tell us and a conveyancing attorney starts the transfer. You can pay in one of three ways:

• A bond from any bank. Your option fee counts as your deposit, and we step out at transfer.
• Cash. Simple, and we step out.
• Borrow from us. If the banks still say no, Nine Stones Capital finances the home over 30 years at a fixed rate. The bigger your deposit, the lower the rate: from 15.25% at a 2.5% deposit down to 12% once you've put down more than 10%.

You pay the normal transfer costs, as you would on any purchase. There are no extra fees for buying early.

What protects you

Rent-to-own is only as safe as the paperwork behind it. With Lease to Buy SA, a conveyancing attorney drafts and records every lease and sale, and checks that the transaction is legally sound before it's recorded.

• Your option gives you the sole right to buy. Nobody else can buy the home out from under you.
• Your deposit is a normal rental deposit, refundable under the Rental Housing Act.
• There are no penalties for buying early, settling early or selling.
• The home is owned by Nine Stones Capital, the company you're dealing with. No middlemen.

Want the legal detail? Our guide Is rent-to-own legal in South Africa? covers it.