Rent To Own

Discussion in Mortgage & House Payments started by Rosyrain • Aug 8, 2015.

  1. Rosyrain

    RosyrainActive Member

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    I am on the mission of getting into a house in the next couple of years and have even explored the option of rent to own. What do you all think of this? Are there benefits or downfalls?
     
  2. Pat

    PatWell-Known Member

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    The upside of rent to own is you get to live in the house as you are saving the money for the deposit and will not have to move out when the house becomes yours. It may be hard for you to get the tax credit on the property as long as you are renting and if something should happen that will keep you from saving the money needed for the down payment or you do not get the loan to purchase the property you may have to move out and start over.
    The rent to own can be a good situation to be in. I would suggest an owner carry situation, that way the property is yours.
     
  3. gata montes

    gata montesActive Member

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    As “ rent to own “has been a growing trend over the last decade where I live and especially with unscrupulous home owners who either can't sell their houses due to structural defects or need to - because they are in financial difficulty and can't pay their mortgages.

    I would just say that anyone considering this option would be best advised to seek legal advice prior to entering into any form of contract - particularly as - although the benefits are that - it offers the buyer the chance to acquire a property at a fixed price without the need for a down payment - as well as get to live in it prior to buying it - there are very many pitfalls that need to be thoroughly investigated and protected against beforehand.

    For example - although having a valuation of the property to determine a fair market price as well as a full survey to ensure that there are no undisclosed major repairs and more importantly - verifying the title to make sure that there are no debts on the property - will offer some degree of protection to the buyer - there is also the possibility that regardless of whether or not the buyer has a contract with the seller

    the property can be seized if the seller goes into bankruptcy or decides to get divorced

    as well as

    the seller could decide not to sell - which is common trick amongst unscrupulous sellers when property prices increase - as they just withdraw the property and then sell it elsewhere for a higher price

    neither of which the buyer will be compensated for.
     
  4. Ke Gordon

    Ke GordonWell-Known Member

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    Well I think it is a good option if you don't have the immediate cash payment for a house. I think it could benefit both buyer and seller however, I would look into the legal implications of this should you decide to do it. It is one of the trickier aspects of potential home ownership. I think the post above gives a good evaluation of what could happen with this method of homeownership.
     
  5. Corzhens

    CorzhensWell-Known Member

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    There are rent to own schemes here but it is not advisable. Better yet, you take a bank loan and buy a house and lot that is for sale. Most rent to own houses have a high rate of interest because of their internal financing scheme. Property developers like that are acting like banks where they earn interest for the investment they put for building the house.
     
  6. Zyni

    ZyniWell-Known Member

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    You will usually end up paying a lot more for the property in the long run than it is worth, including a higher interest rate. Most sellers that are willing to carry the note will want to charge a premium.

    The first thing I would look at is making sure there are no liens or other hindrances that would create issues with transferring the title when the time comes. Also, be sure everything is spelled out clearly, such as who is liable for repairs and maintenance during the renting phase, who will cover final closing and other costs later, etc.
     
  7. xTinx

    xTinxWell-Known Member

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    Where I'm from, such an option is rare. If your country has abundant rent-to-own opportunities then you had better take advantage of them. The setback? You may have to pay more than when you directly purchase a home. The renting-to-own process is rather slow too. I'm not really sure about the details but there are so many cumbersome things to contend with. For one, the contract. You have to abide by it lest you lose the opportunity of owning the house you're renting. However, if the real estate provider lets you switch to direct purchase, then you can go for it as soon as cash becomes available.
     
  8. Diane Lane

    Diane LaneWell-Known Member

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    I was planning to buy a home with owner financing several years ago. It was a really cute little victorian type bungalow, and I fell in love with it. I did some checking online into the people and everything seemed o.k., but then they got really greedy and tried to change the terms, so I backed out. I still think about the house, but am glad I don't have to deal with those people, since they seemed like there would always be an issue.

    Although it might end up costing more money, it might be worth renting to own, particularly if you have an option to refinance the loan, or pay it off early, in case your circumstances change. That would always be my choice, unless the seller was someone I enjoyed dealing with. I know someone who is renting to own who will be paying a lot more than the house they're in is worth. They're in the initial phase of paying larger rent right now, and in a year or two, are supposed to be switching to an actual mortgage, I believe, and the price the seller is going to charge for their place is based on some brand new homes in our neighborhood, not on the actual value of the place they're buying/living in. Be very careful who you will be dealing with, and always consult an attorney, to ensure that your rights are looked after.
     
  9. thenextGeek

    thenextGeekActive Member

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    The only benefit that I see from a rent-to-own scheme is that you can rent it to other people. That way, they're paying your mortgage for you and you don't have to worry about the high interest rates any longer. This only becomes possible though when you can find a willing buyer, or your space is in a prime location.
     
  10. remnant

    remnantActive Member

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    This is a good arrangement for someone who has identified a house that matches his preferences with regard to cost and the environment. A better arrangement would be to pay a certain percentage of money above the rent to cater for the payment of the deposit which would accumulate over time.
     
  11. djdontpay

    djdontpayActive Member

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    The idea of rent to own is great. However, you need to think about how to mitigate the risks associated with this kind of an investment. What if you stop working or get laid off? How will you then pay the rent? What are the conditions in case you have to delay payments? At what point will the real estate company come after you if you don't pay the rent?

    After considering and researching all that, the most important question you need to answer is - how much money would you need to get by in case things go wrong?
     
  12. hades_leae

    hades_leaeActive Member

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    With renting, you don't have to worry about the problems that will occur when you are trying to move. You just get all your stuff and go, sad to say it's not that easy with a house. You have to take care of everything with a house, but it's much better than an apartment because you actually own the property and don't have to worry about proximity, and noisy neighbors threw the walls.

    I love houses, but they can be a pain to take care of, you have to pay for everything that you can think of, there is no calling the leasing office to get a new oven when it breaks down, or having the bug companies come out to spray for free/paid for by management.

    There are a ton of things that separate them both, but if you are up to home management, going with the house is the best option. Be prepared to spend the majority of your monthly earnings on your house, that is if you don't have savings, or don't make more than 3 times the mortgage.
     
  13. Jamille

    JamilleActive Member

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    Rent-to-own schemes are quite tricky. You have to read the fine print and see for yourself what you're getting into. In my country, many new subdivisions are offering their units under rent-to-own arrangements. Some of them are doing so because they have no legal rights to sell the properties at this point as the documentation for the subdivision has not been fully complied with.

    In many cases, if you calculate your total payments, you'll find that you'll be paying a lot more than what you would have paid if you opted to take out a 'regular' mortgage.

    Many subdivisions offering rent-to-own are developers who have not been accredited by the government housing agency and must offer their units for in-house financing. These developers would then offer their units under the rent-to-own scheme to avoid lengthy foreclosure proceedings in case of the borrower's default which has become common nowadays.

    Take note that when you enter the rent-to-own scheme, the title will not be transferred to your name while you are renting. If you fail to pay your monthly rental for a few months, you can be evicted immediately. Whereas if the title is under your name, it will take sometime before you can be evicted. In my country, we have a law that grants a partial refund to a defaulting mortgagee. A renter does not have that protection.