With property prices still sky-high and the cost of living biting, Australian home buyers are hunting for creative solutions in 2025. One option getting more attention is rent to buy (sometimes called rent-to-own). But how does it actually work, and is it a safe shortcut to home ownership – or a risky detour?

How Rent to Buy Works in 2025

Rent to buy is an alternative path to home ownership where you lease a property with the option (or obligation) to buy it later. You pay rent plus an extra amount (the ‘option fee’ or ‘rent credit’) that goes towards your eventual deposit or purchase price.

Lease period: Typically 1–5 years. During this time, you rent the home as usual.
Option fee: You pay an upfront or ongoing fee for the right to buy the property later. This can range from $5,000 to $30,000 or more, depending on the property.
Purchase price: Locked in at the start, shielding you from price rises (but not falls).
Final sale: At the end of the lease, you can (or must) buy the home, usually securing a traditional mortgage at that point.

In 2025, some fintech start-ups and property developers are revamping the model, offering digital platforms for contracts, legal checks, and property searches. However, the fundamentals remain: it’s a hybrid of renting and buying, aiming to help buyers who lack a deposit or can’t qualify for a mortgage just yet.

Pros and Cons: Who Is Rent to Buy Right For?

Rent to buy isn’t a magic bullet, but for certain Aussies it can be a game-changer. Here’s who might benefit — and who should tread carefully:

First home buyers struggling to save a deposit as property values rise.
Gig workers or new migrants who don’t meet bank lending criteria today, but expect to in a few years.
Families wanting stability (e.g. access to a school catchment) before they can buy outright.

Advantages:

Live in your future home while you save and sort out your finances.
Potential to lock in a price in a rising market.
Build equity via rent credits or option fees (if structured fairly).

Drawbacks:

If the market falls, you might pay above-market price when your purchase date arrives.
Option fees and rent credits may be lost if you decide not to buy (or can’t secure finance).
Contracts can be complex, and consumer protections remain patchy in many states.

In 2025, ASIC and state governments have flagged a crackdown on ‘predatory’ or misleading rent to buy schemes, with new disclosure rules for developers and platform providers. However, legal protections still vary — so reading the fine print, and seeking independent legal advice, is essential.

2025 Policy Changes & Market Trends

This year, several developments are shaping the rent to buy landscape:

NSW and Victoria have introduced new disclosure rules, requiring providers to spell out all fees and potential risks in plain English.
The 2025 Federal Budget did not introduce a national rent to buy framework, but did flag more funding for affordable housing and support for low-deposit buyers via the First Home Guarantee.
Major banks remain cautious: as of June 2025, most still won’t count rent-to-buy contracts as equity for traditional home loans, though some specialist lenders are piloting products for these buyers.
Proptech start-ups like OwnHome and Assemble are expanding their offerings, aiming to professionalise the space and offer more transparency.

Despite the risks, rent to buy is growing in popularity, especially in outer-metro and regional areas where affordability is stretched. But experts warn it’s not for everyone — and a standard mortgage will almost always be cheaper if you can qualify now.

Real-World Examples

Case Study: OwnHome in Sydney
Sarah, a 32-year-old nurse, used a rent to buy scheme in Western Sydney after being knocked back for a bank loan due to her short work history. Over three years, she paid an extra $600/month in rent credits, which went toward her deposit. When her credit score improved, she was able to secure a mortgage and buy the property at the pre-agreed price — even though the market had risen 12% in that time.

Case Study: Regional QLD
Jack and Priya entered a rent to buy contract in Townsville in 2022, but couldn’t secure finance by 2025 due to rising interest rates. They lost their $12,000 option fee, highlighting the downside risk if personal circumstances or the economy shift.

Key Questions to Ask Before Signing Up

Is the purchase price fair, and how is it determined?
What happens to your option fee and rent credits if you don’t buy?
Who pays for repairs, council rates, and insurance during the lease?
Can you walk away at any time, and what’s the financial penalty?
Is the provider regulated and reputable?

Always get a qualified lawyer to review any contract — and compare the total cost against other paths to ownership, such as shared equity or low-deposit mortgages.