Rent-to-own : The pros and the cons of Malaysia’s RTO scheme

Malaysia’s Rent-to-Own (RTO) program is a unique housing scheme that combines the benefits of renting and owning a home. The RTO program offers renters the opportunity to live in a property while making a down payment, building a credit rating, and ultimately becoming a homeowner. This is an attractive option for both landlords and tenants as it provides landlords with a steady income while also offering tenants a path to home ownership.

Pros of the rent-to-own scheme in Malaysia

Path to homeownership: RTO program provides an opportunity for tenants to eventually become homeowners, even if they do not have the means to do so initially.

Flexibility: Tenants can try out the property before committing to a full purchase, giving them the opportunity to determine if the property and the neighborhood are a good fit for them.

Build good credit score: Tenants can build up their credit score by making rent payments on time, which can make it easier for them to secure a mortgage in the future.

No down payment: Buyer will need to rent the home for 5 years or less and decide if they would like to purchase the property

Cons of the rent-to-own scheme in Malaysia

Uncertainty: In some cases, tenants may prefer to discontinue the lease agreement if the property amenities, facilities, or environment does not meet their requirement.

Expensive rental: It can be costly. The rent payments are often higher than the market rate, and a portion of the rent goes toward the purchase price of the property.

Risk of default: If the tenant is unable to make the rent payments, their lease can be discontinued, lose their right to purchase the property, and potentially damage their credit score.

Legal complexities: RTO program can involve complex legal arrangements, so it is important to seek the advice of a qualified legal professional before entering into such an agreement.

Overall, the RTO program can be a good option for tenants who are unable to secure a traditional mortgage, but it is important to carefully consider the advantages and disadvantages before arranging a purchase of a house. Your credit score is important in securing a mortgage. Make sure you are paying on time, financial management is important. Once you build a strong credit score, getting a mortgage will be easy for you to purchase your dream home.

Unfortunately, the RTO program has ended in 2022. However, there are still plenty of unsold houses in Malaysia. According to News Straits Times, Dr.Ahmad Hariza Hashim suggests the government extend financial assistance such as the RTO program or loans with lower interest rates to sell off unsold units to individuals who are interested to buy houses in 2023. What are your thoughts on this?

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