Buyers looking for other finance options

Rent to own agreements have been given a bad reputation.

 A few bad landlords who got desperate people to agree to shady transactions made rent to own agreements look like dodgy real estate transactions.

 Today, however, with a shift in the lending market, and the challenging financial climate, rent to own agreements, also called lease options or lease purchase agreements, are returning as a mainstream home buying option.

Rent to own got a bad name for a variety of reasons.

Perhaps first and foremost, these agreements were only entered into by those with extremely poor credit. As a result, they generally ended poorly, with the transfer of property from one owner to another not being completed, but instead with an enormous amount of hassle for everyone involved. Today however, demographics with fair credit have looked to owner financing as a feasible alternative credit option. Both buyers and sellers have experienced significant benefits from these agreements.

The global economy and changes in lending policy in Australia, the United States, and Europe have forever altered many families' ability to get a mortgage. Those who have even small blemishes on their credit history, who have other large loans, or who are self employed may find it especially hard to acquire traditional home financing.

People are transferring from city to city searching for gainful employment, and lower cost of living. Those who wish to accrue interest in a property, who are not interested in renting, but are also not prepared to take out a mortgage with a traditional lender, are increasingly looking at homes with a rent to own option.

With housing prices near their all time high, one of the greatest struggles for those interested in home ownership is saving up a down payment. Banks require a minimum of five or ten percent, and as much as 20 percent down at the time of purchase. Saving this large a sum can limit most families' ability to buy for years.

With rent to buy options, there is no down payment required. Instead, renters agree to a rental period of one to two years, with the option to purchase the home at the agreed upon price at the end of the lease period. Then, each month, a portion of the rent is deducted from the agreed upon purchase price.

With Rent to Buy you basically agree to rent the property for an agreed period, usually 1 -2 years with an option to purchase the property for a price agreed upon today. Usually the seller will ask for an option fee that is taken off the purchase price if you proceed to purchase the property. Further a portion of the rent is usually also credited off the price of the property. These credits can then take the place of a traditional down payment when the buyer is in a position to take out a traditional mortgage on the property.

Generally, those who engage in a lease to purchase agreement get all the benefits of home ownership from the day they sign the lease, but understand that they will not truly own the property, or that the title will not transfer into their name, until they get a traditional mortgage for the purchase balance from a bank, or pay off the agreed purchase price in full.

Rent to own purchase options are a serious transaction, and should be entered into with sincerity. Talk to a lawyer when setting up a lease option to ensure that it is legally binding and written in a manner that is fair to both parties

No comments:

Post a Comment