If the thought of qualifying for a mortgage gets you nervous and overwhelmed, rent to own homes is a type of agreement that could help you get a house without making a financial commitment. Depending on your financial condition, this option could be of great help – especially if you aren’t there financially to buy a house yet.
With an option of renting to own, you’ll get to rent out the house you want and buy it after some years. This could help you knock down some serious hurdles homebuyers face. However, like any other agreement, it has some pros and cons.
In this blog post, we have listed the pros and cons of renting to buy properties with the help of Stop Renting Perth to help you decide if this is something you want to choose.
Pros of Rent to Own Homes
Option of renting to own comes with various benefits, some of them include:
This option provides the flexibility to potential home buyers to move into their dream house without qualifying for the mortgage. It helps build equity on the house, which helps them buy it later.
With this option, the agreements are usually long-term, giving both buyers and sellers security. The sellers can trust the buyers to take proper care of the property. At the same time, the potential homeowners have the security that the landlord will not sell the house without any prior warning.
Extra Time to Improve Credit
You’ll be surprised to know how many people are unable to fulfil their dream of homeownership just because of a few bad financial decisions. However, there is still hope for people with rent to own properties. They can now rent out the house of their dreams with an option to buy it later. During this time, they can improve their credit score, which will help them qualify for the mortgage later when they need it.
You Can Buy House at Lower Market Price
The final purchasing price of the house is determined at the time of signing the contract. Therefore, even when the property price increases over time, the homebuyers will not be concerned about the price rise.
You Get to Live in The House Before Buying
After the rental agreement, you are not obligated to purchase the house. You have an option, which you can avail, depending on your living experience on the property. This day-to-day living experience can help you make a rational decision before making any financial commitment.
As ideal as it sounds, like any other agreement, there are downsides of rent to own in Perth and around other parts of the world. Here are a few of them:
Cons of Rent to Own Properties
Some of the disadvantages that the buyers and sellers should be prepared for include:
Find New Buyers If Tenant Refuses to Buy the House
Since the potential buyer is given a choice at the end of the rental agreement, there is a high chance they won’t buy the property. In this scenario, the seller has to go through the process repeatedly, requiring them to spend more time and money.
Sometimes Seller Have to Sell Below Market Value
Since the property’s value is calculated at the time of the rental agreement, the seller will have to sell the house at the agreed-upon price. So, even if the market value of the property increases, the price stays the same.
Buyers Sometimes Have to Pay More Price
Continuing with the above point, the same scenario can be a problem for buyers. If the real estate prices reduce, the buyers will still have to pay more (that was decided before).
So, here’s all you need to know! Now that you are aware of the pros and cons of rent to own homes, you are now more capable of making the right choice.
If you have decided to rent to own, move to our next section, where we answer the questions of potential homeowners about the contract.
Frequently Asked Questions
How do I write a rent-to-own contract?
Whenever you are getting into a rent to own agreement, make sure it includes the following details:
- Agreement date
- Name of the seller/landlord and buyer/tenant
- Property location and address
- Rent amount
- Monthly payment & due date
- Security deposit
- Landlord and tenants’ obligations
- Purchase date and any other details both parties want to be included.
What is a rent-to-own contract called?
The rent-to-own contract, in some cases, can also be referred to as a lease-purchase agreement. It is a decision between the seller and buyer where the current homeowner leases out the property to potential buyers, who can purchase the house after the agreed-upon years.
Is rent-to-own a good option?
It is an ideal choice for people who cannot qualify for a mortgage but want to escape the rental trap as soon as possible. Initially, the seller can rent you out the property with the commitment of selling the house after some years. It gives potential homeowners a chance to build their credit that helps them to qualify for the mortgage when they need it.