What is a rent to Own?
Rent to Own seems to be the hot topic of conversations over the past couple of years. So what exactly is Rent to Own and is it a good option for people looking to get out of renting and tired of making their landlord rich?
A rent to own is where you lease a home, but you also control the property by having the option to purchase it at a later time during your lease period. The owner cannot market the home for sale, since he/she is bound by the agreement to sell the home to you at a pre-determined price that you agree on before you move in. There is two parts to the agreement:
The first is a standard lease that spells out the monthly rent, and other standard lease terms.
The second part is a Real Estate Option. This is a one way agreement that binds the Seller to sell to you at an agreed upon price. The Seller has to sell when you want to buy (during the option term), but you don’t have to buy if you don’t want to. That is why it is a one way agreement.
Who pays the property taxes and insurance during the Rent To Own?
The property owner is responsible for paying the tax and house insurance. You are responsible for paying the monthly rent (that remains the same for three years) and utilities until you actually complete the purchase.
I am renting now, how is this different?
This is a way to help you get started toward BUYING your own home. Part of your rent payment goes towards the purchase of the home you are in. Instead of throwing your money away each month on rent and having nothing to show for it at the end of the year, with Rent to Own, each month a portion of your monthly payment (typically 20%) is credited toward the purchase of the home.
My credit is less than perfect, can you still help me?
Yes, in many cases most Rent to Own companies can assist. If you qualify for a basic rental agreement, then it’s likely you can be helped to get into your own rent to own deal provided you have a minimal down payment. The minimal down payment is typically between 2-3% of the purchase price of the home but may vary from company to company.
Can I have my lawyer look at the paperwork?
Yes, it’s a good idea to have legal representation however, if you choose not to, that’s fine as well. You are highly advised to consult a reputable licensed legal representative although there is no law that makes this compulsory.
Does the whole process work like a normal sale?
No, the process works a whole lot faster than the usual bank method. Approval can usually be granted and delivered within a few days. From there, all that is needed is for you to pay the deposit, sign the agreement and move in – it’s as simple as that.
Can I renovate my home?
In most cases Yes. As long the owner is contacted prior to any major changes and the work is performed by a qualified trade’s person. Apart from most Rent to Own companies have no problem with it as you are improving the value of your home which is beneficial to you when it comes to refinancing.
In order to purchase your own home, in most cases you need to meet the following three criteria;
1. Good Income 2. Good Credit Score 3. 5% Down Payment
If your missing one of the three above and your tired of throwing your hard earned money away, Rent to Own may be a great option for you and your family.