The rent-to-own process, also known as rent-to-buy or rental purchase, is a type of legally documented transaction. Under this procedure, tangible property, including vehicles, household appliances, electronics, furnishings and even jewelry, is leased in exchange for weekly or monthly payments. So far, it seems like any regular rental process, right? The catch is that the agreement stipulates that the property can be purchased at some point during the contract. The usage of this type of transaction first appeared in the United Kingdom and the United States during the Postwar years. And while traditionally associated with several consumer goods transactions, the term has been increasingly used in real estate over the years.
This system is of particular interest to brand-new homebuyers. Most people looking to purchase a home finance the acquisition through mortgage payments. To qualify, you need to have a good credit score, as well as cash for an initial down payment. However, not all prospective buyers have the means to adopt this traditional route. Does that mean that homeownership is something that is only reserved for a select few?
This is where the rent-to-own process comes into play. It means that you can rent a home for a particular amount of time while also having the option to purchase it after the lease has expired. Let’s look a little more into what the process entails so you can decide if it is the best option for you.
The homes
If you choose to live in a rent-to-own household, you can choose between two types of agreements. The first stipulates that you can buy after a specific time, while the second makes purchasing the home an obligation. As a general rule, you should make the purchase shortly before the lease period is set to expire. Since you pay rent each month, you can have the option of having a portion of that money go towards the down payment. Excess funds are applied to the home purchase when you decide to buy. Some of the contracts also bind you to maintain the property in perfect condition, and you may also be liable for repair work if something becomes damaged during your stay.
Renting to own is an appealing alternative for individuals interested in owning property but who, for one reason or another, are unable to follow up with the traditional proceedings for the foreseeable future. If you’re in this situation, whether you’ve got a low credit score or don’t possess the means to fund a sizeable down payment, renting before you buy can provide you with the extra time to save more or improve your credit rating.
Steps to buy
Entering a rent-to-own agreement means signing a formal contract. The terms should be clearly specified, and it’s essential that the contract is made in accordance with the local rules and regulations in your region. This ensures that the transition from renting to purchasing will be smooth, and you don’t have to be concerned about legal irregularities along the way. After you’ve completed the purchase, you’ll be free to make your house a home and decorate it however you want. To keep in line with the rental purchase alternative, you can choose rent to own electronics that allow you to shop for any household appliances or furniture you might need. It’s easy to make the payments so you can get all the home goods you require as quickly as possible.
However, before you move on to this step, there are a few extra things that you must consider. First, you should agree on the purchase price. Sometimes, you will decide on the price when you and the seller sign the contract. The cost can sometimes be slightly elevated compared to the current market value. Or you can set a final price once the lease expires based on the current market value. As a buyer, you also have the option to “lock in” the costs, especially if the market tends toward continuous price growth.
In terms of maintenance, you’ll also have different requirements based on your contract. Usually, it is the landlord’s responsibility to perform any repairs. Since sellers are still the de jure owners of the property, they can still elect to cover the costs themselves, as they are still responsible for taxes, insurance and association fees. However, you should still get a renter’s insurance plan that can provide you with liability coverage. Make sure to check the contract to determine what your attributions are and whether they focus only on primary work such as raking leaves or mowing the lawn or if you’re also in charge of more substantial repairs, including fixing the roof, walls or damaged electrical wiring.
The main advantages
So, are rent-to-own agreements the best option for you? The answer is yes, particularly if you’re ready in any way but financially to become a homeowner. Throughout this agreement, you can get your finances in order without worrying that the home you want will find a new owner before you’re ready to make a purchase. Not only do you get to build your credit score to a more favorable rating and save enough money for an upfront down payment, but you also get to live in the house and become adjusted to it.
Moreover, if you decide you don’t want to buy, you get to move out of the property just like any other rented household after the lease term is over. You won’t be under any obligation to continue renting or buying the home. This means that should your contract allow it, you have the option to research the area, compare prices and do your research. You can take it a step further and explore the seller’s history in real estate transactions to decide if you want to continue and make a purchase.
Becoming a homeowner is something that you should only do after careful consideration. The rent-to-own system allows you to take your time and not have to rush into things, as well as get a more secure financial situation before making a purchase.
Comments(2)