Important Things To Know About Rent To Own Homes
After moving in and out from one to the other, you have come to a decision not to rent anymore. Well the thing is, you don’t have the documents asked from you or your finances fail to meet the requirements to get a mortgage. If you would consider the rent to own option, this will not be much of a problem anymore. However, there are things that you must be mindful about before proceeding with this option.
Basically, rent to own is just like renting a house. You will rent a house but rather than just renting it, it has the option of buying it at the same time. The lease option would fall on the seller’s term but most of the time, this lasts for 3 years more or less and you are expected as well to put an option fee or upfront down payment. In most instances, this is going to be 1 to 7 percent of the property’s agreed purchase price. Aside from the rent, you’ll be paying what’s called Rent Credit or Rent Premium. This additional amount is what put towards the final purchase price of the property.
So say that the average price for a 2 bath and 3 bedroom house is approximately 1,500 dollars. The added amount that you should pay for this is now something that you have to discuss with the owner. In general, you may expect to pay roughly 20 to 50 percent above market rent but for sake of the argument in this article, let’s stick to 25 percent.
In the event that you are going to pay 1,500 dollars a month for the rent, 25 percent of that is 375 dollars that goes automatically to the purchase price. If for example that the lease is set to 3 years, then you are going to pay the rent credit amassing 13500 dollars and that’s how rent to own works.
But as soon as you have taken the path of rent to own property, do the best that you can in completing the lease term. Because if for example that you are unwilling or unable to buy the house prior to the end of your lease agreement with the owner, you will forfeit all the money you’ve paid including the rent premium as well as the option fee. The seller will keep it all and you have to move out and start things all over again.
You’d probably be surprised on the number of times that this thing happens. Plan things thoroughly before proceeding to rent to own option.