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Rent to Own means the process that lets you pay for your house by paying rent. Owners who wish to sell their house can benefit from taking on a tenant who pays rent each month yet makes repairs and looks after the house as if it were their own. For the new buyer, this effectively means that each payment you make goes towards buying your house, which may sound like a fantastic deal. However, it is not a clear cut as it may seem and you should know the downsides of this option so that you don't end up losing everything.
When you buy a house on the rent to own scheme you should know that not all of your monthly rent will in fact go towards you buying the house. For the new owners, you will in fact be paying off some interest each month to the previous owners, meaning that you will have paid a lot more by the time it comes to purchasing the house outright.
On top of this, any rent to own tenant should be aware of the fact that you will have to pay money up front. Whilst the schemes may be advertised as no money down, there are special payments that are usually required which can cost you up to 5% of the final sale price of the house. This is known as 'options consideration' and you must certainly take this into account when working out how much you want to spend on your house.
Scams do exist when it comes to money up front. Make sure that you do not have to pay a finder's fee or money to fix your credit. It is much wiser to spend some extra cash and hire legal help who can save you money and hassle down the line.
Whilst you do pay money up front, this is no guarantee that you own any part of the property. Many people believe wrongly that this is a down payment, but it is in fact a payment that only goes towards the price of the house if you can pay all the payments and buy it outright. If you end up not buying the house, your original money is completely lost and you are not entitled to any percentage of the home.
These are just a few of the reasons for the sad fact that many people who rent will never end up owning their house. If you have bad credit ratings you may be attracted to such a scheme, but this is exactly the people the scheme is aimed at - people who will probably never be able to pay enough to own the home by the deadline.
It is important to take into consideration all of these factors before choosing a rent to own scheme. Whilst this is great for families or individuals who are working towards saving enough money for a property there are risks which you should always bear in mind.
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