Sometimes, mortgage is not the best option for you right now. This is when rent to own homes can be a perfect way to gain home ownership in a non-conventional way.
Rent to own homes are a popular concept these days because it gives people an opportunity to come a step closer to their dream home.
In this article, we will tell you everything you need to know about rent to own properties to help you make an informed decision.
What are rent to own homes?
Rent to own homes are lease options that give you a choice between buying the property or a requirement to buy it at some point in the future. The rental payments paid towards these homes include rent and funds that partially contribute towards a down payment in the future. If your credit scores are not up to the mark or you do not have the finances to pay for the down payment right now, then you can use this opportunity to hold the property till you do.
How to find a rent to own home?
Rent to own home is not usually find on the listings because they only happen under very specific conditions, such as:
- When the owner is unable to sell the property even though it has been on the market for a while. In this case, they may list the property as rental with a rent to own option.
- If the tenant is happy in their home, but the landlord wants to put it on the market, then the tenant may request them to have a rent to own agreement.
- If a certain property has been on the market for a while, then a home buyer may approach the seller with a rent to own offer.
If you are trying to Find Rent To Own In Edmonton, then you can either start looking at rental listings that come with this option or a sale listing that has been around for a while.
How does it work?
Here is how the rent to own homes work:
- You sign an agreement with either of the two options: There are two types of agreements for someone who wants rent to own homes – a) a lease agreement with an option to buy which gives you the right to buy the home at end of your lease but it is not an obligation. But be prepared to lose all the money you paid for the rent; b) lease with purchase agreement makes you legally obligated to buy the property at the end of your lease. However, before you sign up for this contract, make sure you have a home inspection done. You may also want to get pre-approved mortgage to ensure that you will qualify for a loan when the time comes.
- The purchase price is decided by you and the landlord: The purchase price of the property is negotiable and set up front. Traditionally, this price is determined by the real estate agents who negotiate on your behalf. However, agents rarely every get involved with rent to own home transactions because they have no way of getting paid until the home sale concludes. Therefore, you must do all the research and legwork before discussing prices with the landlord.
- You have to pay an option fee: While this fee is negotiable, it is mandatory as well. The option fee can be anything between 1-5% of the purchase value that needs to be paid up front. It is one-time and non-refundable fee that gives you the option to buy at an agreed upon price in the future.
- You decide the duration of rental term: At the end of your rental, you should be in a sound financial position to buy the home. The rental agreement can be anything from one to three years, depending on how long you need to sort your finances and be ready to qualify for a mortgage.
- Maintenance roles should be defined: Since rent to own homes are a unique situation, the tenant and the landlord are both obligated to maintain the property and keep in good shape until the ownership is transferred. So, be sure to iron out these details in advance.
- Your monthly payments cover down payment and rent: You can discuss with your landlord to define these monthly payments that are usually 25% to 30% above the market rent. This additional payment is applied towards your future down payment.
Whether you are in a rent to own home situation or a regular rental, keep an eye on your finances to make yourself eligible for a mortgage down the road.
Author: Eernesto T Felder