#rent to own programs
Benefits of Rent to Own Home Program
What is Rent to Own Program?
Rent to own is basically a rental agreement or a lease contract with the option to buy a home at a fixed pre-determined price after the rent-to-own period ends. A portion of the amount paid by the prospective buyer goes toward the equity and also toward establishing or building the buyers’ credit.
How the Arrangement Works.
In a typical scenario, the tenants will usually rent for a set duration after which they’re offered the option to purchase. Some of the rent is usually credited to the closing cost or purchase price. A tenant could also buy the option to purchase the property for a set price when their lease ends by putting down a non-refundable deposit.
In most cases, this is set at 3% of the property’s value. The tenant is however not bound to purchase when their lease expires. If the tenant fails to purchase, the option fee remains with the seller. In the meantime however, the landlord cannot sell to another party.
Like with a normal sale, both parties are free to negotiate on the amounts. Once an agreement is signed however, the property’s price remains locked until the rental term expires. Irrespective of the fluctuations in housing prices, the price originally agreed upon remains final.
This period is normally set at between one and three years. In return for the convenience of such agreements for the tenants however, the landlords usually charge higher rates than conventional loans. The charges are also significantly more than one would pay for an up-front transaction.