Important Things To Know About Rent To Own Homes
So you have finally got to a point that you are fed up in renting. The thing is, you can’t provide the necessary documents or perhaps, your finances don’t meet the requirements for a mortgage. Don’t worry because now, you have the chance to get a house with a rent to own option. However, there are things that you must be mindful about before proceeding with this option.
Rent to own options are most likely how other rental properties work. 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. This is normally 1 to 7 percent of the purchase price you and the seller has agreed for the house. On top of the rent, you will need to pay as well the Rent Credit or Rent Premium. Such amount will go directly to the property’s purchase price.
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.
Now back to the drawing board, the rental fee for the house is 1500 dollars, get the 25 percent of that and that is what you have to pay for the purchase price. If your lease is set to 36 months, you will be paying an accumulated rent credit of $13500, which is how each rent to own structure 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. The reason for this is that, if you can’t pay the house or unwilling to proceed with the deal before your lease ends, you would forfeit everything that you’ve spent on the house including the rent premium and the option fee. You will be force to move out, start all over again and the seller gets to keep it all.
As a matter of fact, there have been several cases to which this happens before. So make sure that you have a well thought plan on how you’d go with rent to own option.