Benefits of Rent-To-Own
Renting to own your home is an alternative worth considering for many individuals and families that, for whatever reason, are unable to get a loan through the "regular channels". It provides prospective buyers with the opportunity to improve their credit profile and save up for a down payment, while, at the same time, allowing them to take monthly steps forward towards ownership. Most people only purchase one or two houses in their life.
The rent-to-own option allows buyers to get a feel for the house over the contract length (typically 3 years). Depending on the agreement, a rent-to-own buyer can retain the option either to purchase or not purchase the home at that time. When effectively negotiated, a buyer may make a more informed decision towards when making such a timely and life altering decision. In this article we will discuss some of the key benefits of the rent-to-own option.
The Benefit of Time
When purchasing a house, time and timing is always of the essence. The rent-to-own option can offer many benefits in this regard. For the buyer, it offers time to prepare for the purchase of the home, time to improve items on their credit report that could influence home loan decisions, time to take the steps necessary to improve income and build savings that can be used as a down payment. To function successfully in the modern age, a strong credit profile is often essential. Time allows a buyer to demonstrate a more consistent payment history, which, in turn, can increase their credit score. Time also allows a buyer to pay down existing debt, participate in credit counseling services, seek debt consolidation programs or help from professional credit repair providers.
The seller may also benefit from this additional time. Having a home on the market can be stressful. There is energy spent showing the home, on negotiations and wondering if the home will ever sell. The rent-to-own option gives sellers this time back. This fact also helps the buyer as an informed and our frustrated owner is more likely to consider a rent to ownership option.
The Benefit of Credit Toward Purchase Price & "Sweat" Equity
One of the most attractive points of renting to own your home is the ability to use Option Credits to help pay the purchase price. This means, quite simply, your rent check is no longer just going to a landlord or Management Company's bank account and providing no further value. When you negotiate a rent-to-own contract, a certain amount of your monthly payment is often considered an Option Credit. As an example, the rent might be one thousand dollars a month with five-hundred of that allocated to the purchase price of the home. With a common three-year arrangement, a buyer has the ability to put $18,000 towards the purchase. That's much better than a typical rental agreement where you're lucky if you receive your security deposit back.
Many times repairs made during the "rental period" can be taken off of the final price of the home as well. This "sweat equity" has led many individuals and families save thousands of dollars. When a buyer takes on home repair, they are acting, more-or-less, as the seller's maintenance man. The buyer purchases the items needed for the home and makes the repairs.
As one example, let's say the buyer performs home repairs that would typically cost, on average, $1500 through a contractor, but, because the buyer did it themselves, the cost is only $500. It is not out of the question for the buyer to ask for the full $1500 off the purchase price of the home, pocketing $1000 in sweat equity. If a buyer is handy with repairs, they could potentially add significant equity to the purchase through some old fashioned elbow grease.
The Benefit of Peace of Mind
One of the most difficult parts of being a renter is not being able to see an end to submitting that monthly check, with the understand that if you don't pay, you could be evicted. With the rent-to-own option, although a monthly check is still required, a buyer can rest easier knowing some of the money is going towards a purchase and not simply a temporary arrangement.
Another benefit that produces less general worry as a by-product is the flexibility offered. The buyer has the chance to "try out" the home, the neighborhood and the school district before committing to this lifetime investment. Both the buyer and seller often negotiate the option of backing out of the purchase at the end of the contracted period. Although the buyer often loses the money they've paid in the Option Credit and any initial purchase payments, they are not simply stuck with the property for the long haul. A rent-to-own contract is often only terminated in extreme cases, but still they can be terminated. This is unlike a mortgage where there are no do-overs.
There are number of benefits to pursuing the rent-to-own option for aspiring home owners. Now that you're more familiar with some of them, the next step learning how to find available rent-to-own properties