Buying in today’s market is a definite advantage with low interest rates, available funding and large inventories of homes. However, not everyone is in the position to purchase, sometimes due to debt, credit issues, or lack of available down payment monies. In these situations, a Rent to Own or Lease Option may be the best strategy.
After locating the right property for you, you will enter into a contractual rental agreement whereby the property is leased to you for a specified period of time. You will make monthly payments which are specified in this agreement, and at the end of the lease term, you have the option to purchase the property at an agreed upon price as specified in the agreement. This price will be set and cannot change throughout the term of the agreement. Some agreements may credit a portion of the monthly rental to the purchase if you exercise your option to purchase.
Lease terms are usually for 12 months, and can be renewed, but all terms are subject to change at the time of renewal such as monthly rental, the purchase price of the property and possibly other terms of the rental agreement. Lease agreements may include an option fee which will be charged at the start of the agreement and credited to you at the execution of your option. However, if you do not execute, the option fee is lost to you as its non-refundable.
Your win-win
By entering into a Rent to Own agreement, you have time to correct any credit issues or increase your credit score and save for your down payment
You secure a price on the property you may purchase, allowing you the benefit of any appreciation during the lease term.
You have time to experience home ownership before it actually becomes your own, securing your confidence that you can make regular monthly payments, and by setting aside a little money each month for your down payment, you can also experience saving for any property maintenance issues or upgrades that you may want to make after you exercise your option.
