Paying rent to your landlord each month is often seen as waste by those who advocate home ownership. Although, buying a house is not on everyone’s list of goals.
While it could be true that everyone would enjoy the potential benefits to owning a house, not everyone can afford the pricey mortgage payments, repairs, and other costs associated with buying a house.
Those who can ill-afford the big down payment the lenders require may find rent to own homes appealing. Basically rent to own involves a standard lease agreement combined with an option contract. The option contract outlines all of the important details you and the seller agree upon.
This strategy of buying property has gained the attention of many people. Especially those who wouldn’t otherwise be able to qualify for a home mortgage. Also helping to grow the popularity of lease option deals are the many benefits they can provide. Here are a few benefits to buyers:
Taking a test drive before buying the house
You can experience having a house without paying so much. You can consider this as your preparation in buying that house. If you find the house isn’t an ideal fit, just choose not to buy it.
You have time to repair your credit during the lease/option period
If you have bad credit, you have the time to establish your reputation and clear your bad credit history. You can still scout for mortgages with great bargains.
You do not have many competitors
Unlike other houses where you have to compete with other buyers, you do not have to compete as much in a rent to own setup. While you are under the contract, you are the only one allowed to buy. Moreover, you are not pressured to buy the house at any time.
The value of the house may go up
If the value of the house goes up in the duration of the rent-to-own agreement, the seller cannot increase the price of the house. Consequently, the seller cannot sell the house to another buyer. The agreement between the buyer and seller is binding during the period.
Since you do not own the house yet, your landlord will pay the taxes on the home, unless otherwise agreed.
Unlike loans, rent to own homes approval is faster and lies in the discretion of the seller.
You get the legal right to purchase the home within a certain period without actually owning it.
Usually a portion of the buyer’s rent payment goes to the home equity. A portion of the buyer’s rent goes to the down payment each month.
While the benefits of lease to purchase homes are quite tempting, you should always bear in mind to check the seller’s background. In this type of transaction your money goes down the drain quickly if you are not aware of what’s going on.
Tenants and landlords should arrive on an agreement where both parties benefit. Some properties can be structured in a way that only one party benefits. Hence, you must be an educated buyer to take full advantage of the lease to own potential.
Last word of caution, make sure your seller pays the mortgage if there is one and always put everything in writing.