Owning a home is great, but it comes at a price – the sacrifice, maintenance, and the price involved. Nothing beats owning your own home though. Homeowners will tell you it’s a huge investment and worth every penny. You have total control over your living space. For many people, finance is often a hindrance towards getting that dream home. With modern innovations, your dreams can come true. You can rent a house and make payments for future ownership. And this is called ‘rent to own.’ So, how do rent to own homes work?
Rent to own explained
It is a leasing agreement or arrangement. The tenant rents the property for a period with added payments. After a set time, the tenant has the opportunity to buy the property. Under this scheme, you can ‘own’ a home without large upfront costs. This is a great way to own home, especially for young buyers.
Lease agreement with options
Indeed, this is not a typical landlord-tenant agreement. Under the terms of the agreement, you have to pay option money. It is the cost of the option to buy the home. No doubt, this is often a non-refundable, paid by the buyer to the seller. Also called ‘option fee,’ it allows you to buy the house at a prescribed future date. Be mindful to negotiate the option fee because standard rates do not apply. Lease option fees are usually 1% of the sale price.
The contract involved
Buyers are well advised to read through the agreements they enter, especially if the terms are difficult to understand. There are two main rent-to-own contracts. A lease option is flexible and gives you the right to buy. You can buy the home at the expiry of the lease agreement. Further, you can decide not to take up the option to buy. Also, you won’t be bound to continue in rent payment or buy.
The other contract type is a lease-purchase contract. At the end of this lease agreement, a buyer is under obligation to buy. It can be tricky to get out of, hence the need for a proper perusal of the agreement. Don’t just ask how do rent to own homes work. An attorney can help you with that.
Purchase price and rental payments
The lease agreement should be clear on how the sale price is determined. It can be set at the initial stages or at the end. It is preferable to settle on a price after doing your homework on the property.
Another point to note is paying your rent during the lease term. Also, consider how much of your rent is geared towards the purchase price. Again, carry out a check on the property as it helps you know the value of what you’re willing to pay for.
The landlord is usually tasked with the maintenance of the property. In actuality, it is a common feature under leases for rent and land contracts. Tenants now take on more responsibilities under rent-to-own agreements.
It is important that the lease agreement state how to divide maintenance time and costs. Paying for repairs may seem out of the norm. But, taxes and other rates are covered by the landlord. A buyer should be willing to cover some homeowner’s expenses.
Are Rent To Own Houses Worth It?
In conclusion, if you have bad credit or not enough money for a down payment then renting to own can be a great option to you becoming a home owner. Click on the link below to take a look at some rent to own homes near you today!