Owning a house brings self-fulfillment and sense of pride to homeowners, especially if they have paid off their underlying mortgage on the home.
However, with the difficulty in finding lenders or financial institutions that grant mortgages to people with bad credit, that house may be just a dream. Rent to own may be the solution to one’s dream house.
Rent to own homes are gaining popularity because of the current market and credit conditions.
Generally, lease to purchase is a system that combines lease with an option to purchase the property in a given period at an agreed price. Those who plan to use the rent to own method should be educated on how rent to own works in a more detailed manner.
Generally, the borrower pays an option fee, 1% to 5 % of the price that is credited to the purchase price along with the market rent and rent premium.
These fees are all negotiable items like any other sale. This fee goes to the down payment or to the purchase price of the house once the tenant decides to purchase it.
If the buyer knows how to negotiate, he can arrive into an agreement where payment favors him. The renter usually pays a higher price for the rent compared to the usual market rate.
The buyer has the freedom whether to exercise the lease option or not.
Meanwhile, the lease-purchase binds both parties of the sale. This choice is less flexible and has higher legal consequences.
How does rent to own work for the seller?
Rent to own house for the seller presents various benefits. The seller is eased with the burden of paying the mortgage on the home he wanted to sell.
The seller can generally ask for a higher asking price since he helps the buyer in financing the purchase the house.
However, the seller can also face dilemma in selling rent to own houses. In the event, that another buyer is interested in buying the house, which is under an agreement, the landlord cannot sell the house. The contract is binding; hence the tenant is the only buyer under the agreement during the option period.
How does rent to own work for the buyer?
Buyers can also benefit from rent to own system. One great advantage is that he can still repair his credit history given the time. Three or more years are usually given to the seller to finally purchase the house. In addition, since the seller still owns the house, the tenant is freed from paying liability tax.
Major house repairs should still paid by the seller.
Sellers have varying requirements where you can easily comply. You can also get quicker approvals compared to loans since the seller does the assessment. To top that, having a rented house prepares you in actually having it.
This allows you to consider your finances and your preparedness in having a home of your own..