Rent-to-Own Homes
These days there is a plethora of wonderful homes on the market. If you've found the home of your dreams you will be eager to get things finished with your house sale and move into the new home as soon as possible. However, sometimes things don't happen quite the way you had hoped and you are saddled with your former home for longer than you anticipated. The cost of supporting two homes is more than you can afford and now you have to consider the options. How will you deal with this?
A Viable Option
Many people who find themselves in the same situation have found that the rent-to-own option is a good one. Similar to a car lease, a rent-to-own deal requires that the renters pay a certain amount of money monthly to live in the house and at the end of an agreed upon period of time, they have the option to purchase the property. Usually the period of time is up to three years. During the time of rental, a portion of the money goes to the seller as income and a portion is held toward a down payment on the house in the event of purchase.
Getting Things Straight
It is imperative that both renter and seller are very clear about the contents of the contract before they sign on the dotted line. Renting to own has pluses and minuses on both sides of the equation. Obviously, the seller who has already bought another house is now free from paying two mortgages and buyers who can't afford to purchase at the present time are able to get into a home.
Before an agreement can be made, the seller has to determine a price for the house and an amount to charge for rent. In a rent-to-own agreement, both of these amounts are subject to negotiation, just as they would be in a regular house sale. However, once the agreement is signed, the amounts are locked in for the duration of the agreement - regardless what the market is doing.
Option Fees and Rent Premiums
The renters are required to pay an option fee as well as a rent premium. The option fee is a set amount paid directly to the seller that will become part of the down payment should the renter decide to buy the house. If the renter decides against a purchase, then the option fee goes to the seller. Rent premiums are an amount of money slightly in excess of the rent that goes toward the down payment. This is a great way for people who don't have money saved for a down payment to be able to acquire the money necessary. It works well for the seller, too. The mortgage is still being paid and there is some income, especially if the renter decides not to buy.
