One of the best ways to buy a property at a price that is not influenced by market trends is a rent-to-own option.
What is rent with option to buy?
Rent-to-own media is a situation where you agree to buy a property at a future date, based on a value specified in the agreement, and live in the property on a rental basis in the meantime. Other terms used to refer to this form of purchase agreement are lease-to-own option or rent-to-own option.
What is part of a rent-to-own agreement?
The Rent-to-Own is made up of two sections. One section details the terms of the lease and the other section has the option to purchase.
The lease section specifies features such as lease amount, lease period, date by which the amount is due, etc. In the buy section, you can see the mentioned details about the opportunity to buy the property, at a specific time in the future along with the price.
What aspect should you know about a Rent-to-Own contract?
In a lease-to-own agreement, three factors will apply. These are the rental premium, option fee, and rental credits.
The rental premium is an amount that you must pay towards a down payment on the property. It is an amount that is a little more than the rent. Another thing that goes toward the down payment is the option fee. However, you should be aware that the option fee is non-refundable to you, should you decide at the last minute that you don’t want the property. A rental credit is a portion of the rent payment that is also contributed to the down payment. This is added by the seller to the initial payment each month.
Benefits of renting with option to buy
There are many benefits to a rent-to-own situation for both the buyer and the seller.
As a buyer, you win because changes in market value won’t affect the price you pay for the property. So if prices go up, you don’t have to pay more, just the same amount that was put in the deal.
You contribute toward down payments through rental premiums, option fees, and rental credits, so this reduces the total amount you must pay at the time of purchase. This is a real bonus for you when it comes time for payment.
Finally, if at the last moment you decide not to buy the property, you are free to do so. There is no binding option in the purchase. Although all the money paid for down payments in such situations becomes a loss for you, you can eliminate a purchase, which you also think is not correct at the last minute.
Sellers benefit from having someone who will take very good care of their property as they will own the property in the future. The seller gets money not only for the value of the house, but also in the form of rent, which is an additional source of money, until the purchase is made. In case the buyer decides not to buy the property in the end, the money taken through the option fee, the rental premiums do not have to be repaid.
A look at the other side of the coin
As someone entering into a lease-to-own agreement, you need to know the other side of this situation. As the buyer, he will lose the rental premium and option fees, should he ultimately decide to back out of the purchase. In the seller’s case, if market prices were to rise suddenly, he would be losing out, since the price set for his property would be significantly lower.