A popular real estate option for many new homeowners is the rent to own home option. This is also commonly referred to as a rental purchase and involves a homeowner leasing a property and paying a particular amount either monthly or weekly. This is quite different from a lease agreement since the homeowner has the option of purchasing the property after 3 years or at a specified time in the future. This is a preferable option for many people who would want to own a home rather than renting.
Renting vs owning a home
Rent to own home is usually a good option for many people for various reasons. However it does not suit everyone. You should consider it as an option if you:
Cannot access a mortgage as a result of a poor credit history
Cannot purchase a home because of a lack of choice or resources
Have not decided on settling down
Are not prepared to own a home
Have a stable income
Want to repair your credit
There are other additional benefits and features that you get to enjoy once you choose to lease to purchase a property. These benefits include:
A faster way of accumulating equity – There is a higher growth in equity for rent to own homes when compared to homes that are purchased or homes that have been financed by a bank or a lender.
Minimum Cash out – All you need to do is pay an initial deposit and the rent for the first month. You get to avoid paying closing costs, down payments and other fees associated with home purchases. Most people especially those that have a low credit rating go for this option since they do not have to part with a lot of money to buy a home. Renting homes for them is more affordable.
Appreciation Profit – Rent to own lease agreements usually have the selling price of the home locked in. This implies that your equity increases as a result of the property appreciation.
You do not need stellar credit history – A rent to own agreement has very few restrictions. The sole decision lies with the seller and not the bank or lender, hence you are highly likely to get an approval. You also do not need to wait for a mortgage loan approval.
Short Move in Period – Normally in a mortgage agreement, it takes time before one can get settled in the new home and start living there. However with a rent to own agreement once the agreement is signed and approved, you can move in within a week.
Unlimited control of the home – Even before you sign the purchase agreement, the rent to own agreement puts you in full control of the home including its improvement and maintenance.
No payment of taxes
– since you are not the legal owner of the home, you are not entitled to pay any property taxes while you are renting.
Money paid gets credited – the deposit you pay gets credited once you buy the home. The rental money also goes towards the down payment.