Why Rent-to-Own Could Be the Right Path for You and How it Works

So, you’re weighing up your options. And you’ve heard about Rent to Own. You’re wondering if it’s the right option for you. Let’s break it down and look at what Rent to Own means.

What is Rent to Own?

Instead of relying on traditional home loans, Rent to Own agreements can be a good substitute that provide an affordable option. The majority of first-time homebuyers usually need a mortgage to buy their property. However, if you don’t qualify for this then Rent to Own can be a good alternative. Essentially, you would sign a contract where you begin by renting the property with the intention of buying it later.

What’s the process for Rent to Own?

Initially, the seller and buyer agree upon a price for the property. Often, this price is higher than present day costs. The buyer will have the option to purchase the house for that price regardless of the value of the house in the future. At the point that the buyer is ready to make the purchase, they may then apply for a mortgage.

What should I expect?

You as the buyer will need to pay an upfront fee known as an Option Fee. This price may be negotiable but it is generally nonrefundable. This fee allows you to purchase the property later.

There are also different kinds of arrangements. You might sign a contract that is a Lease Option contract. This would mean that you would have the option to buy the property but you are not committed to buying it. Therefore, if you decide not to buy the property, you would just allow the lease to expire with no obligation to buy. Alternatively, you could sign a Lease Purchase agreement which could indicate your obligation to buy. Think carefully about which contract would be right for you.

The Pros

Rent to own can be a good option for those who may not have an initial down payment or if they have poor credit. It can give prospective home buyers the chance to work on improving their credit and saving over time while living in the house they wish to purchase.

The Cons

In the end, if you decide not to buy the home, you will have to forgo the upfront fees and any extra costs. And there’s a lot of initial planning and price predictions to rely upon. If your personal situation changes you might not be in the financial position you had hoped for.

Know what you are agreeing to

Just like any contract, read the fine print carefully and know exactly what your rights and obligations are. Research thoroughly if this is the right option for you in your journey towards home ownership. Remember that there are different types of contracts for Rent to Own properties and you need to fully understand what you are agreeing to.

How do I know if it’s the right move for me?

You’ll need to check over all the details and pay attention to the particulars of your contract. The end goal will be to own your own home. If traditional methods of obtaining a mortgage are not an option for you, then Rent to Own could be ideal for your situation.

If you’ve still got questions, we would love to hear from you. We’re here when you need us. We would love to discuss if this could be the right option for you.