One very interesting home purchase option is Rent-to-Own. Let’s take a look at it in more detail.
The Term
Rent-to-own home is a term to define a home that you, as a buyer, will rent for a given period and then buy later at a price specified in the agreement. The option is also called a lease-to-own option or a rent-to-purchase option.
What is included in the Agreement
A typical rent-to-own home agreement consists of a lease section and a purchase option. The former consists of all the details related to rent credit, the period for which you are taking the house on rent, the monthly payment that you have to make and so on. The purchase option gives you the opportunity of buying the property during a specified time period in the future at a mutually agreed upon price.
About terms Rent Credit, Option Fee, and Rent Premium
As a renter of a rent-to-own home you need to pay an option fee and a rent premium. If at the end of the term of the agreement, you intend to buy the house, the option fee that you have paid becomes a part of the down payment for the same. It is non-refundable in case you intend otherwise.
A part of the rent premium that you give also goes toward your down payment. A rent premium is generally a bit more than the rent. You receive rent credits every month. They add on to the option fee and become a part of your down payment when, according to your agreement you can buy the house and your intentions aren’t otherwise.
Benefits of Rent-To-Own
Here is a look at what you gain as a buyer in such an agreement:
• No matter how high the real estates rates are during the period of your purchase of the rent-to-own house, you are required to pay only the amount that you had fixed upon during the time of signing of the agreement.
• Your option fee, rent premiums contribute towards your down payment and make the same minimal during the time of purchase. Hence, you are making an investment throughout your period of paying the rent for the rent-to-own home.
• There is no binding upon you to buy the home at the end of the rental time period.
The seller also benefits. The seller who is renting to sell the home also enjoys many benefits. His property will be looked after well by the renter as the latter is investing a considerable amount of money in it throughout the lease period. If the renter decides not to buy the property, the seller gets to keep all the money as there is no refund. Tax advantages and a fixed purchase price irrespective of market fluctuations are other advantages.
The Other Side of the Coin – Disadvantages
Here is a look at the disadvantages of this type of property purchase:
The buyer loses all the money that he had given to the seller of the rent-to-own home if at the end of his lease period he decides against buying the same. The seller faces a loss if, during the period of sale of his rent-to-own home, the real estate prices shoot up than the agreed-upon purchase price.
Weigh the pros and cons and consider the terms of the agreement very carefully before signing the agreement for your rent-to-own home.
Try
Tempe Homes for Sale. You can also consider
the Islands Properties and
Ahwatukee Homes.
