Everyone wants to have a place to relax after a hectic day at work or just outside. Most of us don’t have the leverage to save up for years for the required down payment.
The social and political situation in every country is uncertain. Rent to own home is a convenient and quick approach towards getting your dream home.
It is an agreement between the tenant and homeowner in which a portion of the rent is credited towards the purchase price. When the leasing period of rent to own property ends, you have paid more than half of the actual price.
For millennials, it is an ideal situation since they want to stop renting today. You are paying for the home you want to buy without focusing on the down payment or worrying if you qualify for a mortgage.
There are two main kinds of agreements. Firstly, the lease option, which is more flexible for the buyer; secondly, the lease purchase, which is comparatively less flexible as the house has to be purchased either way. We have created a list of things that a homeowner needs to consider before signing the contract.
Amount of Rent Being Paid for Rent to Own Home
Not every tenant is going to credit the specified amount from monthly rent towards the decided purchase price. They would want something in return. In this case, you haven’t stopped renting in real terms.
Your rent isn’t making a difference for the future payment. Hence the saving is zero in terms of down payment. It would be required in most cases.
Purchase Price of the House
It seems like a wise financial decision as homeowners will have the time to save up for a down payment. But if you calculate the actual amount for rent to own properties, the amount being paid is not less than the market price.
The procedure of stop renting seems simple, but it is not. Since individuals will be required to pay security, application fees, and the rent of few months in some cases, there is an upfront fee that is non-negotiable, non-refundable and is based on the value of the house.
Suppose it is too expensive, then instead of going for rent to own properties, you can save or put the money in a mutual fund. The interest earned will enable you to own home quickly.
Future Value of the House
The value of land appreciates or depreciates over time. But the value of some lands does not increase. This can be a problem when buying rent to own properties as the price is decided beforehand.
Suppose the house value decreases, the credit paid will be lost. Banks will not be willing to buy it off or even agree on the mortgage as the house will not be worth it. If you are not able to cover the difference, then the property will be lost.
Maintenance and Insurance Costs
Most landowners don’t pay for maintenance once the rent to own home contract has been finalized. The tenant pays for all repairs and maintenance costs. It is a risky condition as there is no guarantee.
If you decide not to purchase the house, then all that you have spent will be lost. It is essential to hire a contractor such as Stop Renting Albany. They have a wide variety of properties from which you can make a choice. If you are confused, then you can book a consultation with them.
Frequently Asked Questions:
Is rent to own really cheaper than buying?
Experts in the real estate industry believe that buying a house has more pros than renting. The option is great for people moving around a lot, such as students or travellers, as they don’t have to stay in one house for long. Rent to own is cheap if you are planning to live for an estimated three years or less.
Suppose you want to live in a house for longer, then consider buying a home the traditional way.
Is rent-to-own safe?
It is a legal and authentic way of buying homes. Especially if you want to stop renting immediately, you can be scammed by the landlord as the legal system will be on their side most of the time.
Is the rent-to-own program real?
Since it is a relatively new phenomenon, most people doubt the credibility of rent to own homes. There are two main ways through which you can own a home. Lease and purchase. You can choose between them depending upon your requirement.