For many Americans, buying a house seems like a dream that may never be achieved. Without adequate savings for a down payment or poor credit, home ownership can be difficult to attain via traditional means. Often, renters feel as if their monthly payments are going toward providing a better life for their landlord, and not as an investment for themselves.
Lease to own homes can be a beacon of hope in these situations. Combatting the two big obstacles that wishful homebuyers struggle with the most, credit history and lack of savings, rent to own homes allow tenants to start applying some of their monthly payments toward the cost of the house they live in. At the end of a specified term, they then take over the property themselves. Let’s take a look at some of the benefits of this strategy.
Save Automatically, And Obtain Your Dream House Sooner
When renting to own, a contract is put into place that dictates all terms of the transaction. The rental payments will be somewhat higher, but a certain percentage of those monies will be put directly toward the price of the house. This means that the money you pay anyway will be automatically saved and invested into your future home. The price of the property is agreed upon up front, so that as the contract goes on, the renter (soon to be owner) is already gaining equity. Using this strategy, start-up costs are minimal in comparison to buying a home outright. The buyer pays the landlord an option deposit plus the first month’s rental payment, and the contract is in place.
The option deposit goes 100% toward your down payment, and money from your monthly payments is applied directly as well. This results in a significant increase in the time it takes to pay off the debt, as typical standard mortgage payments are comprised of principal plus interest. If anything happens and the buyer wants to get out of the contract, the landlord keeps the option deposit. No credit check is necessary, as approval is solely based on the landlord’s discretion.
Rent To Own Homes Are Less Risky For The Buyer
The contract will protect both the buyer and the landlord. All of the terms are clearly laid out, including the sale price, how much the monthly payments will be during the contract, what percentage of rent goes toward the down payment, and who is responsible for utility payments. If any major maintenance issues come up, the landlord is still usually responsible for the repair, or the buyer can walk away from the deal. In addition, the landlord continues paying property taxes, since they are still the owner of the property.
Being able to get started with so little on a lease to own property means that the buying power is significantly increased. Each monthly rental payment can be viewed as an investment, and you’ll feel the pride of ownership even before the contract has completed. In most cases, there is no additional down payment needed at the end of the contract, and your credit history has had a chance to improve, making financing much faster and easier. If you educate yourself on the process, and agree on a fair price for the home, rent to own homes can help you obtain your dream faster.