In Focus: What Is A Rent-To-Own Home?

What is a rent-to-own home? A rent to own home is basically similar to an ordinary home for rent. The main difference is that after you rent that home for a few years, you will have the option of buying that home and owning it for yourself. It is almost like buying a house on a loan basis. This is not a new type of deal, however, it has been here for quite a few years now. But since the slide of the economy and the housing market, rent to own has become quite a popular alternative in owning a home rather than buying a brand new house because it would cost less and almost anyone can avail of these.

Here is how rent to own houses work. When you choose a rent to own home and are about to seal the deal with the home owner, you will have to agree on the price of the house and many other deals. Any deal or agreement that concerns the rent to own process has to be stipulated in the contract. This is done to be legal and to protect both you and the seller. Once a price has been set, before you move in, you need to know two important payments one is the option fee and the other is the rent premium. Though there may be other fees but these are the essential fees that you must take note. You can only move into the house after you have paid the rent premium, some people would require you to pay the rent premium for a few months in advance.

In your question of what is a rent-to-own home? You must first know what are the option fee and the rent premium. The option fee is ten to fifteen percent of the total agreed price of the home. Sometimes the percentage varies depending on deals. This option fee serves as income to the owner, and is an initial down payment for the home. While the rent premium is basically similar to rent, the only exception is that rent premium is higher than normal rent. This is because that extra rent is a small monthly payment that goes directly to the payment of the house. In a rent to own house deal it is important to know that both the rent premium and option fee are usually forfeited if you choose not to buy the home at the end of the rent period but sometimes you may haggle with the seller to add this clause in the contract.

The rent period is the time you are allotted to lease and live in the home. This is basically like renting any other dwelling except that it has a time frame. Normal lease to own home rent periods are between one to three years, while others can reach up to five or more years. It all depends on your negotiations with the owner. At the end of the lease period you will have the option to buy or not to buy the house. When you choose to buy the house, all the deposits will be counted and you will just have to pay the remaining amount. Usually the lease period is the time for fixing or building up your credit, or saving up for that final purchase.

This may have answered your almost timeless question, what is a rent-to-own home? This is usually what rent to own is all about. Though there may be other alterations, but because rent to own favors the buyer more than the seller then everything is possible over a cup of coffee.