People traditionally buy new homes using home loans. To secure financing, it’s important to first save money for a down payment and have a good credit score. But, of course, more may be required. If you’re considering a rent to own condo, it’s a good idea to know some basics about how the process works and the benefits of pursuing this arrangement.
This is an agreement between the owner and a potential buyer in which the buyer is allowed to live as a tenant for 3 to 4 years after which time he or she purchases the property. The option to buy usually requires the tenant to pay a fee to the owner/seller. The fee is usually 3% of the total cost of the property.
There are Two Types of Agreements used for a Rent To Own Transaction:
Rent To Own Contract: This is an agreement in which the buyer is legally bound to buy the property at the end of the lease.
Lease with the option to Buy: This type of agreement gives the tenant the chance to purchase the property after living on the property for the lease term without any legal requirement to buy it when the term ends.
Exact payment arrangements will differ based on the buyer/owner agreement. But the owner generally agrees to accept the sale price based on the current market value of the house. During the lease period, the tenant pays the rent, and a portion of it is allocated towards the house’s purchase price. This is referred to as rent credit and usually encompasses 25% of the total rent paid.
Although exact terms can differ, tenants/buyers are usually responsible for the condo’s maintenance during the rental period. They may also be responsible for insurance, property taxes, and homeowners’ association fees. As long as their in a lease agreement, they will have to have renter’s insurance.
The tenant may be responsible for routine maintenance and repairs, while the landlord or owner may be responsible for major repairs or replacements. It is important to review the terms of the agreement carefully to understand each party’s responsibilities.
Condos for rent-to-own can be found on real estate websites or through an agent. It is essential to completely explore the details of the understanding and talk with a monetary counselor prior to entering into a lease-to-claim arrangement. Whether you’re considering condo developments in Toronto or elsewhere, it’s important to carefully evaluate the benefits and drawbacks of condo owners to make an informed decision.
Yes, the purchase price can be negotiated at the beginning of the agreement or at the end of the lease term when the tenant decides to exercise their option to purchase.
If the tenant decides not to purchase the condo, they will typically forfeit their down payment and any portion of their rent payments that went towards a down payment.
No, if the rent-to-own agreement includes an option to purchase, the landlord or owner is legally bound to sell the condo to the tenant at the agreed-upon purchase price.
You should consider rent-to-buy condos if you cannot arrange a down payment at the moment or have trouble getting finance due to a poor credit score. It will give you time to address your financial issues.
Rent-to-own condos can be an especially good idea if you’re moving to another city and are still getting familiar with the city. Living in the condominium utilizing the rent-to-own option will give you time to experience. The area and decide whether you want to live in the area long-term.