So, you have reach your boiling point and don’t want 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.
So rent to own works like a typical rental property. You are renting a house but, it comes with the option of buying it. You will be given a lease term that last for 2 or 3 years depending on the seller and you are expected to put a form of upfront down payment or an option fee. This is normally 1 to 7 percent of the purchase price you and the seller has agreed for the house. Aside from the rent, you’ll be paying what’s called Rent Credit or Rent Premium. Such amount will go directly to the property’s purchase price.
For instance, you have to pay $1500 dollars for a house that features 2 bathrooms and 3 bedrooms. Now, the added amount that you’ll pay for the purchase price is something that you and the owner has to negotiate. 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 the lease is set to 36 months, then you will have to pay a rent credit worth of 13,500 dollars and that is 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. This is because of the fact that if in the middle of the lease you come to a decision to not continue with the term or can’t pay for the rent monthly, the owner will forfeit everything you have paid including the option fee and the rent premium. The seller keeps all and you don’t have any other choice but to move out.
You’d probably be surprised on the number of times that this thing happens. Plan things thoroughly before proceeding to rent to own option.