So that you are tired of renting. You need to own your house, but you do not have a downpayment. Without a doubt you’ve heard of “the perfect solution” – rent to own. But could it be really as perfect as everyone says – hardly. There are some secrets about rent to obtain properties you will want to be familiar with. These are most overlooked aspects of a rent to have deal. So allow us to get the truth about lease to own homes.
How Rent to Own Works
Making this how it works. You rent a house together with the option to buy. You’ll have a lease which will typically last between Two to three years. The vendor will likely expect you to put some sort of upfront advance payment or option fee. Normally, this is 1 to 7 % of the decided final cost. Besides the rent, you will pay what is known as a Rent Premium or Rent Credit. This extra amounts put towards purchase price of the house.
Let’s see the way a Salt Lake City, Utah rent to possess works out. At the time of January, 2017 the median rent to get a 3 bedroom, 2 bath house in Salt Lake City is $1,500. The additional amount that you will pay towards the purchase is negotiable. Generally you should expect to pay for 20 to 50% across the market rent. In the interests of argument, let’s choose 25% that’s about average. So you’ll pay $1,500 per month in rent with an additional $375 towards purchase. If your lease lasts 3 years, you’d probably possess a rent credit inside the amount of $13,500. Median home in Salt Lake City are $280,000. If you paid a 3% option fee of $8,400 and combined by investing in the rent credit, you would have a downpayment of $21,900 or 7.8%. So good.
The reality regarding rent to buy homes
Do you want to know the dirty little secret few buyers inside your position realize? If you determine that you are unable or often unwilling to buy the house at the conclusion of the lease agreement, you forfeit Every one of the money that. Which includes the Rent Premium as well as the option fee. Gone. The entire thing. The vendor keeps the money and you be able to call a moving van and begin throughout.
You would be surprised about how often such things happen. The purchaser may run into some difficulties with the house and so they want out. Money lost. The client is probably not capable to qualify for home financing. Money lost. Or, imagine that the seller fails to pay the mortgage as well as the property gets foreclosed on. Yikes! Money lost.
So, before you race to snap the closest rent to obtain or lease option property, make sure you do your homework and possess the house inspected. Start working having a lender so that you can be eligible for a home loan as well as goodness sake, be sure to really like the home.
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