Going for Rent-to-own homes not only has advantages but there are disadvantages as well. People only get to see the good side of it, and that is if you go for rental properties, you can buy them later on. Also, you have the option of living in that rented property for as long as you want, but you have the choice of deciding whether you want it permanently. Now that we have briefly introduced the advantages, let’s discuss the downsides.
Upfront fees of rent-to-own homes are non-refundable:
When signing a contract, there are upfront fees that you have to pay. The percentage of that fee is entirely dependent on your landlord. Every arrangement is different; however, typically, it varies from about 1% to 5% of the purchase price, but there is no standard fee. On the other hand, if a part of your monthly salary is also applied to the down payment, the rent would be much higher.
In some rent-to-own properties, you also have to pay for the repairing:
That is another downside of rent-to-own properties, due to which people prefer not to rent a property with such a contract. Getting the rental property repaired is a factor that also varies from landlord to landlord. In some contracts, you have to pay for repairing the property damaged when you lived there, whereas, in other agreements, that might not be your responsibility. That is the thing that you need to confirm before you sign the contract because, in most cases, it is the responsibility of the renter to pay for the repairs, and it can be a liability if they are not going to or are unable to purchase the property
There is no guarantee that you will get a mortgage at the end of the lease agreement:
When the lease agreement ends, it does not mean that there are 100% chances of you getting the mortgage or you own a home now. For getting a mortgage, several things are considered, like the amount you’re looking to borrow, the size of your deposit, and the credit income. Other things like your employment status are also taken into consideration. So, if you do not strengthen your credit and firm your finances during the rental period, there are significant chances of you not qualifying for the finances.
By not getting the mortgage, you would be forced to leave your rent-to-own home:
After you have failed to get the mortgage and are not financially stable, then the very next thing that you might have to face is you would be forced to leave your rent-to-own properties because the next renters might need to move in as soon as possible. You must remember that if the owner defaults on the mortgage and the house is being foreclosed on before you buy it, then there is no knowing when you will be asked to leave.
The lease agreement might obligate you to buy the house in the end:
Another downside is that some contracts will bind you to purchase the property at the end of the agreement. It does not matter whether you want to buy it or not as you will be indebted to it. However, if you cannot buy it for some reason, it can land you in financial hot water. Therefore, you have to read the fine print carefully before signing anything.
If you want to know more about the working process of rent-to-own homes, then we encourage you to contact the professionals of Stop Renting Albany.
We are now moving onto the section of some commonly asked questions about renting a property.
Commonly Asked Questions:
Q1: What is rent-to-own?
Rent-to-own is a way of buying or selling something over time. It gives the buyer an option to purchase the property at any point in the future. It is like a traditional purchase and sale in which the buyers and sellers negotiate with each other and then come to a common agreement.
Q2: Can a tenant ask to rent to own a house?
Tenants can probably ask to rent to own a house if they are content with their rental property. However, if the landlord wants to sell that property, you might need to come to a common agreement. The tenant must give them an appealing offer which the landlord could not refuse even if they wanted to.
Q3: What are the benefits of rent-to-own agreements?
When you choose a rent-to-own agreement, it gives you more access to the buyers. These agreements are a challenge to attract buyers who might be interested. It also gives you an option to live in that place before you decide to buy it.
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