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. Well now, this would not be a problem for you as you got the chance of having a house through 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. You’ll have a lease that last for around 2 or 3 years and the seller is expecting you as well to put some form of an upfront down payment or an option fee. In most instances, this is going to be 1 to 7 percent of the property’s agreed purchase price. In addition to the rent, you are also going to pay for the 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 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.
On the other hand, you need to know at the same time that if you chose to go for rent to own, you have to commit yourself in finishing 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. The seller will keep it all and you have to move out and start things all over again.
You will be shook on how many times these sorts of things have happened. To avoid these things happening to you, plan how you will proceed with rent to own option.