Are you unable to afford the cost of a new home yet you want to join the exclusive club of homeowners? Well, you may want to look for a seller who is offering a rent-to-own option. This type of agreement allows you to direct a significant portion of your rent payment towards the purchase of the property. After the rent-to-own period, you can decide to purchase the home or walk away from the agreement.
According to a Montreal real estate broker, this arrangement affords opportunities for both buyers and sellers. Depending on conditions of the rent-to-own agreement, either the seller or the buyer will be responsible for routine maintenance. Here are some of the top benefits of a rent-to-own agreement.
No Down Payment
One of the most significant benefits of a rent-to-own plan is that you don’t have to pay a down payment other than the usual rent deposit. Typically, the rent-to-own agreements state that an agreed upon percentage of your rent payment go towards a cumulative down payment. The renter will then use the accumulated down payment to secure a mortgage to buy the home.
Lock-In a Purchase Price
The real estate market is quite volatile. However, a rent-to-own agreement protects you from this volatility since you can agree with the seller the selling price and nothing will change in the future. Typically, you can agree on the selling price today, but the purchase will take place several years later. Buyers also have the option to back out of the agreement if the home prices fall unless the seller is willing to review the price downwards.
Did you know that renters don’t build home equity? However, when you go for a rent-to-own plan, you will start to build your home equity just like any other homeowner. Your payments will accumulate over time and provide a substantial sum that you can put forward towards the home purchase.
Alternatively, you can choose to save the money in a savings account and use the funds as a down payment to acquire another property in case you back out of the agreement.
Taxes and Insurance
According to a Montreal real estate broker, rent-to-own agreements tend to vary greatly when it comes to taxes and insurance. Depending on the agreement, the renter-cum-buyer may not be required to pay taxes or the homeowner’s insurance on the home.
However, all these aspects must be negotiated while entering the sales agreement. If no taxes are paid, you will only be expected to get a renter’s insurance policy to cover the contents of the home which is a bit cheap compared to a homeowner’s insurance policy.
You Move Less
Most of us understand the pain and expense of relocating from one place to another. But, with a rent-to-own plan, you don’t have to go about the hustle of moving unless you decide to back out of the agreement.
If you have a dream of owning a home in a particular neighborhood, you can start by renting it before you eventually buy it. This arrangement will reduce the cost and inconvenience of moving after a few years.