Important Things To Know About Rent To Own Homes
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. But just before you proceed to this, there are secrets that you should learn about.
So rent to own works like a typical rental property. 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. On top of the rent, you will need to pay as well the 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. In relation to the added amount that must be paid for the purchase price of the house, this is something that you and the owner has to talk to. 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. 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 keeps all and you don’t have any other choice but to move out.
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.