Rent is seen as dead money. This catch phrase has been inflicted in our system, and just like a mantra, repeated to understand it better. Rent is dead money simply means you are wasting money when you rent.
On the contrary, buying a house is not on everyone’s list.
While it’s true that everyone wants to own a house, not everyone can afford the pricey mortgage, repairs, and other associated costs when buying a house.
Those who can ill-afford the big down payment the lenders require may find rent to own homes appealing. Rent to own ia a lease combined with an option to buy the property within a certain period, generally within 3 years or less at an agreed price.
Rent to own homes have gained the attention of many, due to the benefits it offers. Below are few:
- Taking a shot 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 ideal, you can always choose not to buy it.
- You have time to repair your credit while living in the house
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 any competitors
Unlike any 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.
- No taxes
Since you do not own the house yet, your landlord will pay the taxes on the home, unless otherwise agreed.
- Fast Approval
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.
- Equity Growth
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 your seller’s background. You should know as a buyer how a rent to own house works. In a rent to own property scenario, your money goes down the drain if you are not aware of what’s going on.
Tenants and landlords should arrive into an agreement where both parties benefit. Some rent to own properties can be structured in a way that only one party benefits.
Hence, you must be an educated tenant. Make sure your seller pays the mortgage if there is one. Above all, always put everything in writing. There are plenty of frauds out there.