Rent to Own Contract Agreement

Home ownership is one of this American Dream’s badges. Owning your own house provides you a fiscal reservoir for future needs and investment. It gives you a sense of accomplishment. It provides you with a place to settle into and build a life around. Home ownership appeals to many people, but it is also very hard for many individuals to reach. If you don’t presently have good enough credit to qualify for a mortgage, you could consider entering a rent-to-own contract.

How It Works

Leasing to own is just what it sounds like. After finding a home or other property listed as a rent-to-own, you will enter into a double arrangement by which you’re both a tenant and a purchaser. As a tenant, you will pay the owner a fair market rent for the length of your tenancy. As a purchaser, you will pay the owner an up-front sum in addition to a premium on your monthly rent. Eventually, you will have paid the proprietor sufficient extra cash to buy the house outright. Alternately, the rent-to-own contract may only last till you’ve paid down a suitable payment on the home, at which stage you will have the option of buying the house outright or walking away. More often than not, it is possible to even make an outright buy before the contract expires. A rent-to-own spells out both the standard details of a rental lease agreement and the terms by which the tenant can obtain the home or walk away from the agreement.

Option into a Mortgage

Rent-to-own agreements don’t require a mortgage, which makes them an appealing route to home ownership for men and women that would not qualify for one. They also don’t require as big of an up-front fee, with the payment being a modest 1 to 7% of the purchase price. Meanwhile, you may start building equity as soon as you enter into the arrangement.

Try It Before You Buy It

Rent-to-own agreements give you the option of living in a home for a protracted period of time before committing to purchasing it. This offers you the opportunity to learn the quirks, flaws and charms of the home, in addition to the house and the neighborhood. This creates a very nice perk if you’re already interested in leasing to own.

Cost Savings

Even though a rent-to-own contract will almost always cost you more in the long run than a conventional mortgage, you will save a lot of cash up front throughout the tenancy stage of the agreement. This is because the owner continues to be responsible for taxes, insurance and some of the upkeep, based on the arrangement in the arrangement, before you complete the purchase. You’ll also save money up front with the lower down payment.

Disadvantages and Risks

In case you opt not to buy the home when your contract expires, you will forfeit your deposit (and generally your rent premiums) and find yourself back at square one in the game of property possession. You must also beware of unscrupulous vendors and lease-purchase companies who will buy a home for you then rent it to you on a rent-to-own contract. Seek legal counsel or expert help before committing to some rent-to-own contract. Look out for some contract which deviates from the simple assumption of leasing to own by charging you extra fees.

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