If you are looking for a new rental home, and have dreams of someday owning your own house, you may feel tempted to sign a rent to own lease. This type of lease enters the renter into an agreement to purchase the home ath the end of the rental term. This can be a good idea for someone who wants to purchase a home, but their credit rating is not quite ready.
Generally, The landlord has alot more benefits than the tenant in a rent to own situation. Because the landlord can charge more for rent and fees, they make more money off the rent to own lease than a standard rental. They can charge a large deposit. They can also charge a monthly premium which is applied to the down payment should the tenant purchase the home. In most cases, however, the renter does not purchase the home. They may run out of time if the lease has a specific date. They may not keep up with the rent and void the contract. The tenant may also decide that they don’t want the house after all. In short, the landlord will make more money off of a rent to own lease than a standard rental.
For those tenants who do go through with the rent to lease term, there are also great benefits. They can passively save for the downpayment on the home, simply by paying the rent. They can take the time to clean up thier credit rating to get a good home. The selling price of the house is held at the price of when the agreement was made. This is especially a good benefit in times of financial strain.
The cons for the tenant however are hard to escape. Many landlords who offer lease to own options have no intention of ever selling the home. They charge the large premiums and monthly fees and look for the first excuse to evict the tenant and keep the money. They are very likely to offer a short term lease (less than 2 years) demanding that the tenant purchase within that amount of time. Tenants are often given more responsibilities in the upkeep of the home in this kind of agreement which can be costly.
Many people go into these types of agreements because they fear they have bad credit and would never get a loan. In most cases, their fears are keeping them from trying. It is far better to take the chance of being rejected for a home loan than allow themselves to be victimized with an unfair lease.
Now there are some rent to lease agreements that are up and up. If you do decide to go into such and agreement, be sure to check to make sure the duration of the lease is reasonable. It will take at least 2 years to save enough money and to improve your credit rating. Also the deposit should not be exhorbitant and your rent premium should not be more than an extra $100 a month.
