Rent-to-own is a best solution for many, and it is simple and effective. You need to know some financial and legal things associated with this program, including how rent to own homes work. It would be better if you talk to an expert in this regards.
Rent to own home is a straightforward concept. The basic of this program is – a tenant rents with an intention of one day he or she will own the home. It is a great alternative to traditional home financing. It is also ideal in certain situations.
Put it simply, you as a tenant knows the neighbourhood, and the home you want, you are unable to buy it. In this situation rent to home works. It could be an attractive option. It also helps seller or the present landlord of the property who is struggling to sell the home. If the landlord is getting a prospective buyer who can’t afford to buy the property, but have an intention to buy it in future.
With rent to own home, both landlord and buyer have an opportunity to get what they want from the present real estate market.
Many landlords in Canada are opting to include the rent to own home to provide options to renters who actually don’t meet the required credit score, and at the same time they don’t have sufficient funds for the down payment. Though no one denies that the requirements are very difficult to meet, and other ways to homeownership are easy to cope up, rent to own home allows prospective buyer many different opportunities.
How Rent-To-Own Homes Works?
Now, we will tell you how rent to own homes works. Prior to enter into the rent-to-own program or situation, the landlord and tenant sign a lease agreement, where all terms and conditions are mentioned. The agreement, therefore, outlines the monthly payment for the tenant, which includes rent and additional amount that builds towards the down payment for owning the property in future.
In the agreement, it would be mentioned that the purchase price of the property can’t be altered or changed while the agreement is in effect. In actuality, the tenant has the option to purchase the house within a certain period of time, usually in 3 year.
Let’s take it an example, a tenant’s monthly payment is $1,600, it might be that rent is $1,250 and the remaining $350 will be applied towards the down payment for the home. This $350 is called an “option fee.” Also, at the end of the 3-year term, the tenant will have $12,600 put towards the down payment.
For instance, the home has a purchase price of $250,000, which is more than the minimum of five percent needed for a down payment. If you are the tenant, now you are the buyer of the house property, so you have enjoyed for the past couple of years staying in the house, and the seller or your landlord has sold the home at a locked-in price whilst profiting from the investment.
Rent to own home is an attractive option for sellers who struggle to move on from a house property. One of the main reasons why a seller enjoy the rent to own home option is that it secures the home purchase price easily on the property.
On the other hand, tenants enter rent to own home program because their credit score is not too good, whereas they are allowed to live in the home they wish to purchase, and at the same time they get an opportunity to build their credit whilst financially investing in the house property.
There are some pros and cons of financial and legal things associated with rent to own home program, and if you are not well aware of these rules, you might face issues, which is why a professional like Home Owner Soon is there to help you! They will help you understand how rent to own homes works and more. HOS financial Inc is Canada’s most trusted and established rent to own or power of sale specialists. They have been helping families in Canada to achieve their financial goals, when traditional mortgage products are not available. For more, feel free to contact with HOS today! Look no further!