Does a rent-to-own house have its cake and eat it too?

Your lease is up soon and you want to buy a house, only you don’t have a large down payment to make it happen. And now that? Renewing your lease, finding another place to rent while saving for a down payment? Then move back when you finally buy that house? What if you had an alternative to moving twice and you moved into that American dream now? How? That’s what leasing can do for you.

What is a lease with option to purchase? (also called lease-to-own or lease option agreement) and WIIFM (What’s in it for me?)

A lease with option to purchase and option to purchase are;

1. A lease that allows you to occupy the home and

2. An option that allows you to buy the house in the future at an agreed price on an agreed date.

What do you get out of this? Find the home you want to buy, rent it now and buy it later and you won’t have to move twice. If you’re like me, moving is on life’s “short list” of things to do. That’s not the only thing there for you, read on. A typical rent-to-own agreement requires you to pay a slightly higher monthly rent for the house and requires the landlord to credit a portion of that rent toward your down payment.

For example, if the owner’s expected market rent was $1,200 per month, he or she could increase it to $1,500 per month and apply $300 per month to your down payment. After one year, you would have a down payment credit of $3,600. In addition, a typical rent-to-own option contract may require a Non-Refundable Option Consideration for the option contract. This would be added to your rent credit when it’s time to buy the house and would be part of your down payment at that time.

The idea is to build up the down payment over time and when it’s time to get a mortgage, you’ll be ready to go. All of these things would be specified in a formal contract. Lease-to-own and option agreements specify the monthly rent and the amount of rent to be credited toward the down payment. The sale price and expiration date of the option would be specific. Any contingencies such as your right to obtain a home inspection or other important terms of the agreement should be stated in the contract.

The rent-to-own purchase option typically allows the owner to sell the house to you without paying a commission to a real estate broker. Therefore, the advice, experience and assistance of the broker is lost. So it’s a good idea to have a real estate attorney or title company attorney review the contracts with you to explain the terms and answer your questions. And, of course, payment of other closing costs, such as title insurance and transfer fees, are subject to negotiation and must be addressed in the lease option agreement or may be added to that agreement later.

One benefit to you is that a rent-to-own purchase option is not an obligation to buy. A rent-to-own option does not obligate you to complete the purchase. It’s an opportunity to do so with the advantages of a known purchase price and a down payment rental credit. If you decide not to exercise the option to purchase the home, the credited rent will generally be forfeited to the owner. You would also lose consideration of the non-refundable option.

This money is a form of compensation to the owner for the option. Remember, he can’t sell it to anyone else when you have a call option during that time. Reasons you might decide not to exercise the purchase option include: lower property values ​​in the area, inability to obtain a mortgage, a job transfer, or disenchantment with the neighborhood or housing, among others.

Who country what? Taxes, Insurance, Repairs Owner is responsible for property taxes and insurance. Many leases require you to be responsible for repairs and maintenance of the property during the term of the lease option up to a certain dollar amount. Also, the landlord, not you, would suffer a loss if the property were damaged or destroyed by a natural disaster that occurred during the term of your lease option. Most of the time, your rent-to-own agreement will require you to purchase separate renters insurance to cover your personal belongings. Of course, once you purchase the property at the end of the lease option term, you will be responsible for taxes, insurance, and home-related repairs.