Not everyone is financially set to buy a home. Rent to buy is definitely a viable option for one to get onto the property ladder. Even with various available loans and first-time homeowner programs, it can be hard to save for a much needed downpayment and be qualified for a mortgage. In the current competitive housing market, many buyers are not managing to secure homes.
Fortunately, you have options when it comes to potentially owning a home of your own, through rent to buy schemes. Some people are looking into rent-to-own options to secure desirable properties and succeeding.
A rent-to-own-home (also known as a lease-to-own-home) is similar to other home rentals. But, one has the option of buying the house before the lease expires. Typically, the lease contract tends to be longer, anywhere from one to five years.
The likelihood of buying the property within the lease period depends on many factors including the prevailing housing marketing conditions. During a hot seller’s market, it tends to be more difficult to find rent to own homes. In this case, sellers would prefer to sell their homes outright. This can be helpful for the sellers in avoiding issues down the road, for example, if the renter is unable to secure a mortgage. On the other hand, during a slow market, a seller might be more likely to agree to a rent to own agreement. If they need to move and don’t have other offers on the table, this might help them bridge that gap.
Frequently Asked Questions
What can be the downsides of Rent-to-own?
There are certainly risks involved. If the market drops and the home loses value, you’re still locked into the purchase price. Also, if you need to walk away for any reason, you’ll lose the money you’ve been paying towards the down payment each month.
Does rent to own hurt your credit?
Not necessarily. Rent to own won’t affect your credit, positively or negatively, unless the landlord reports your failed payments. If you’re making timely payments, you can ask the homeowner to report them to the credit bureaus. Over time, this will raise your credit score.