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Rent to Own Options- Email this article to a friend - When your bad credit is stopping you from getting a mortgage to buy your own home, one of the options available to you is rent to own (also known as rent to buy). This is an increasingly popular way for people that are struggling financially and have too much debt to be approved for a normal mortgage. It allows you to move in right away, with the aim of eventually buying your own home outright. How It WorksA rent to own agreement is very straightforward, yet it offers one of the best ways for you to own your own home even if you’re a bad credit risk. What normally happens is that you agree with the management of the property that part of the money you pay for rent goes towards the purchase of the home- this may be closing costs, down payment or just right off the price. This enables you to build up funds allowing you to qualify for a loan down the road and get financing for that home. The next step is to decide how long this agreement will be in place. Most rent to own buyers will pay the rent for between 1-2 years, at which stage the accrued amount is enough to use as a down payment to buy the house. This is much like a deposit on a normal mortgage, with the exception that you’re already living in the home you’re buying. So, the best part is that you not only build up funds towards your home WHILE you are living in it, but you can improve your finances and get the best possible loan when you are ready. One of the added benefits of having a rent to own agreement in place is that generally you don’t pay as much as you would on a more traditional mortgage. This is because whereas most of an early mortgage payment goes towards the interest, your rent is going towards the cost of the home itself. When you take into account the amount you save on the interest alone, you can see why many people are now making use of the benefits a rent to own option can bring them. The Difference Between Rent to Own and LeasingOne of the most common mistakes that most people make when talking about a rent to own agreement is confusing it with a lease-with-option-to-buy agreement. Although similar in concept, there is one major difference between the two. The main difference is that the length of renting via a lease option is usually much shorter than a rent-to-own agreement and requires a more substantial option fee. Also, the person renting will also normally pay the owner a non-refundable cash amount, with the option of buying the house at a later date. However, the renter can decide not to take the owner up on this option and simply walk away, and not have to worry about selling the home. There is definitely something to be said about the merits of a rent-to-own agreement, especially if you’re currently in a poor state of financial health. If you’re unsure of whether this is for you or not, we can help advise and point you in the right direction. Lori Jake If you like this article and would like to receive more valuable information like this, Click here to sign up NOW! |
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