The rent-to-own house is also called lease-to-own house. The rent-to-own process is similarly like the process of car lease. The renters usually pay certain amount every month to the house owner. At the end of the period, renters have the option to buy that home. Generally this period is for three years.
Benefits: Benefits of rent-to-own house for buyers are as follows:
- Home buyers are need not pay taxes while paying rent on the home or real estate property. Because the property ownership will not transferred from the seller to the buyer, so the seller has to pay the taxes. Home buyer is allowed to enjoy the benefits of the home without paying any taxes until the final purchase is executed.
- Down payment is difficult for many buyers. Sometimes it is up to twenty percent of the property cost. In the rent-to-own purchase process, buyers need not pay any down payment over a period of time. Some of these contracts have the opportunity to save monthly rental credit by the buyers. At the time buyers are ready to purchase, owners gives the discount up to the amount of monthly rental credit. It offers an equity down payment to the buyers.
- Once the buyer paid the option fee, means that a partial commitment has been made to buy the property. Even though the buyer will have time until final purchase to try the home. If the buyer found any discomfort or mismatches like home not offer the benefits they want, undesirable neighbors, needed repairs, rising taxes, declining property values etc. buyer can walk away from the deal. But remember, option fee will not be paid back.
- This method allows the buyers to improve credit before trying for a home mortgage and they can work credit while living in the home. Before signing on a contract, choose the lease period that coincide the period that you need to improve your credit.
- If you need to take a mortgage, mortgage companies or lenders, check for debt to income ratio, minimum employment history, affordability ratios, minimum credit score, tax records, etc.
It is tough to qualify for many home buyers. In case of rent-to-own method, mostly look at paying the option fee, previous rental history, and monthly lease payments. It is easier to qualify than a mortgage.
Drawbacks: The drawbacks with the rent-to-own are as follows:
- Rents may higher than the normal.
- For paying interest, tax deductions are not allowed.
- If the payment of rent is delaying, there will be a risk to cancel the lease.
- Over all sales prices may be higher than the market price.
Rent-to-own is a non-traditional buying method. Taking the decision to buy in this method is a big step in the purchasing process. Knowing the benefits and drawbacks in rent-to-own method will give a clarity to the buyer before taking decision.