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Rent-To-Own
What Is
Rent-To-Own Housing?
Rent-To-Own (also called lease/option) refers to a contractual
arrangement between the tenant and landlord whereby the tenant rents the
property, much like any other rental arrangement. The difference is
that the tenant also has the GUARANTEED right or option to buy the
property at an agreed upon price sometime during the rental period.
This is similar to a “rain check” at a department store. While the
tenant has the OPTION to buy the property, he/she DOES NOT HAVE TO buy
it. The landlord MUST SELL the property to the tenant at the agreed
upon price, if the tenant so chooses.
Benefits of
Rent-To-Own Housing
Depending on your particular situation, there are several advantages of
a Rent-To-Own house over a standard rental house:
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Rent-To-Own allows you to move into your own house now, with a
relatively small up front payment, even if you have credit
problems that would keep you from buying a house. Once you are in the
house, we work with you to improve your credit over the next year or
two, so you can easily qualify for a good loan.
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Once you have lived in the house for 1-2 years, we help you get a
refinance loan, which is often easier and cheaper than getting a loan
to purchase a house.
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Generally, you can treat a Rent-To-Own home like your own home. You
can paint and decorate it to suit your tastes and make improvements
you would never think of doing with a home you are just renting.
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A
Rent-To-Own home let’s you ‘try out’ an area or house before you are
actually locked into a 30 year mortgage.
How Do You ‘Rent-To-Own’ a House?
Rent-To-Own is a simple process! The
tenants and landlord sign a Lease Agreement and an Option To Purchase
Agreement, each about 2 pages long. Generally, the Lease Agreement on a
Rent-To-Own home differs from a standard Lease Agreement in 2 ways:
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There is an option
fee paid to the landlord for the guaranteed, exclusive right to
purchase the property during the lease term. This is similar to the
down payment required on most home loans, but is generally less money.
Typical option fees range $3,000 to $7,000, depending on the home and
your credit history.
If the tenant buys
the property during the lease period, the entire option fee is credited
to the tenant as part of his/her down payment. If the tenant does not
purchase the property, or if he/she defaults on the lease agreement,
he/she loses the option fee.
- Because the tenant
is to become the owner of the house, typically the lease requires that
the tenant be responsible for all day-to-day maintenance and repairs
under a fixed amount (usually under $400). All this means is that you
will fix the leaky toilet, change the light bulbs, etc. If the
furnace or roof needs replacing, the landlord is responsible for those
major repairs.
The Option To Purchase Agreement simply
states that the tenant has the right to buy the property at a fixed
price during the lease period.
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Serving Central and
Southern New Jersey
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800-757-9144
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