The Points To Remember When Choosing Rent To Own Homes
So you have finally got to a point that you are fed up in renting. What seems to be the problem is that, your financial records fail to meet the requirements to get a mortgage approval or you are lacking of necessary documents. Well now, this would not be a problem for you as you got the chance of having a house through rent to own option. But prior to proceeding with such option, you need to know that there are factors that you ought to know which may affect your decision.
So rent to own works like a typical rental property. You will rent a house but rather than just renting it, it has the option of buying it at the same time. You will be given a lease term that last for 2 or 3 years depending on the seller and you are expected to put a form of upfront down payment or an option fee. This is normally 1 to 7 percent of the purchase price you and the seller has agreed for the house. In addition to the rent, you are also going to pay for the Rent Credit or Rent Premium. Such amount will go directly to the property’s purchase price.
So let us say for example that the average rate for a house with 2 baths and 3 bedrooms is around 1,500 dollars. The added amount that you should pay for this is now something that you have to discuss with the owner. Generally speaking, you will have to pay 20 to 50 percent above the rental price of the market but for this article, let’s stick to median of 25 percent.
Assuming that you are about to pay 1500 dollars per month on the rent, there will be an additional 375 dollars for the purchase price. If the lease is set to 36 months, then you will have to pay a rent credit worth of 13,500 dollars and that is how rent to own works.
But as soon as you have taken the path of rent to own property, do the best that you can in completing the lease term. The reason for this is that, if you can’t pay the house or unwilling to proceed with the deal before your lease ends, you would forfeit everything that you’ve spent on the house including the rent premium and the option fee. The seller will keep it all and you have to move out and start things all over again.
As a matter of fact, there have been several cases to which this happens before. So make sure that you have a well thought plan on how you’d go with rent to own option.
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