If buyers do not have the funds or the credit score to qualify for a standard mortgage loan, however, there may be an alternative option: renting-to-own. Rent-to-own agreements are unique and offer specific advantages and drawbacks to both buyers and sellers. This week, The Property Shop At The Lake is here to help you get a general understanding of how these contracts work.
Note: All rent-to-own agreements are unique. This blog only aims to provide a general overview to help you get a better understanding of the concept. You must talk to a lender to determine what your specific options may be.
Basic Concept Of Renting-To-Own
Rent-to-own agreements are attractive options for buyers who may not be able to qualify for a standard mortgage loan and sellers who may be having a hard time getting their property off the market. In a rent-to-own agreement, the buyers are allowed to move into the property before the purchase and pay monthly rent to the sellers. These agreements typically last for anywhere from 1-5 years, at the end of which the buyer will have the opportunity to purchase the home outright. If they choose to go through with the purchase, a portion of their monthly rent payments that has been set aside up until now will be returned to them and they can apply it towards the down payment. If they choose not to purchase the home at the end of the lease agreement, this money will likely not be returned to them.
How Renting-To-Own Benefits The Buyer
Renting-to-own may be a great option for buyers who wish to purchase a home but are not able to do so as a result of a poor credit score or minimal savings. It allows them to move into the property immediately and "test out" the home and the neighborhood before being locked into homeownership long-term. Rent-to-own agreements also typically allow buyers to lock in the future sale price, so even if the home would eventually be more expensive, they can secure it for the cheaper price. One potential drawback is that many rent-to-own agreements require an initial deposit called "option money." This is the deposit that gives them the option to purchase the home at a later date and it is typically non-refundable. If the buyers are in a challenging financial situation, they may find it difficult to provide the option money.
How Renting-To-Own Benefits The Seller
Renting-to-own may be a good alternative for sellers whose property has been sitting on the market for an extended amount of time. By renting-to-own, the sellers are able to make some money off of their property to offset the costs of their mortgage before the sale is finalized. Renting-to-own may be a more attractive option than simply leasing out your property, because renters who are looking to eventually purchase the property will likely take better care of the home. Depending on your agreement, you may be able to negotiate that the sellers handle the costs of maintenance, repairs, and insurance. This financial help can be enormously beneficial, especially if you have already purchased a new home of your own and are holding down two mortgage payments. One potential drawback is that the buyers may choose to back out of the agreement at the end of their lease, at which point you will have to start the process over with a different buyer.
The Property Shop Agents Can Help You Find Your Dream Home!
If you are dreaming of buying a home at the Lake of the Ozarks, our real estate agents in Lake Ozark MO can help! We can help you scour the market to find the homes that will best meet your needs and negotiate with the sellers to find a sale option that will work well with your unique situation. Visit our website to learn more about how can serve as your trusted Lake of the Ozarks real estate resource.
The Property Shop at the Lake
2086 Horseshoe Bend Parkway
Lake Ozark, MO 65049