Deciding whether you should rent to own or purchase your home can be tricky. However, rent to own is a smart option for individuals who may not have the full down payment for a home in hand. The ability to have your rent money go towards owning a home rather than simply renting a living space that will never be yours is appealing to many people. However, there are some important factors to keep in mind when deciding whether or not a rent to own agreement is the right choice for you. To help simplify your decision-making process we have created this short list of important things to consider prior to signing a rent to own agreement:
- Have the final price negotiated upfront. When it comes to a rent to own agreement it is important to negotiate the final buying price of the home upfront. Be sure the home is appraised and the price that is agreed upon is included in the rent to own agreement. Remember that you have the right to bargain for a price that seems fair to you.
- Check if there is a down payment. Rent to own agreements sometimes require a down payment, though the deposit amount may not be as expensive as one you would pay if you chose to buy the home flat out. Take you down payment into consideration and make sure it is a reasonable price in regards to your full rent to own agreement.
- Understand that rent to own costs more than a normal rental agreement Because you will ultimately own the home, your month to month rent payments will typically cost more than a regular property rental. This factor is especially true when the rent to own agreement requires you to have a down payment because, in the beginning, you will be paying for both your monthly rent and your deposit.
- Always pay with two checks. It is important to keep records of any exchange that occurs throughout your rental process in case you need to prove your initial intent of purchasing the home. One way to make sure everything is laid out clearly is to pay your monthly rent using two checks. Use one check to pay for the regular rent payment, and write a second check to contribute to your deposit. The two-check method will create a clear paper trail proving that you intend to purchase the home, in case you are ever in need of supporting evidence.
- Keep detailed records. It is critical for you to keep a clear record of every payment that is made during your rent to own agreement. This point cannot be stressed enough. One of the best things you can do for your own records is get the property owner’s signature on each monthly receipt as proof of your rent to own agreement.
- Ensure the seller will carry the mortgage. Oftentimes, individuals involved in a rent to own agreement assume the property vendor will keep up with the mortgage, however this isn’t always the case. Be sure to ask up front about the mortgage payment. If the property vendor will not be financing the mortgage payments, then it will be necessary for you to research the mortgage cost before you sign the agreement.
- Have a real estate attorney draw up the contract. When it comes to your rent to own agreement, it is beneficial to have a real estate attorney draw up the agreement to make sure everything is correct and precise. Your real estate attorney will know the best way to set up your rent to own agreement without effecting the type of mortgage you would like to receive. If you cannot hire a real estate attorney to draw up an original rent to own agreement, at least hire a real estate attorney to look over the contract prior to signing it.
- Be aware of the various consequences. Before signing your rent to own agreement, be sure to sit down with your real estate attorney to review the possible consequences if you default on your payments or decide you want to break your lease. Keep in mind that most rent to own agreements are very inflexible.
Once you have taken the time to consider all of the factors involved in signing a rent to own agreement, you can decide whether or not a rent to own contract is right for you. Remember, rent to own agreements vary widely, so you are encouraged to shop around for a good deal prior to signing a legally binding contract.