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5 Basic Elements of Rent-To-Own Homes?

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Stop renting today and buy a house in Perth. But how? Let us introduce you to a very simple concept of rent-to-own homes that will help you achieve your dream to buy a home in Perth. You agree to rent the property over a period of time which could be one, two, three, four, five years or even more before you purchase it. During this time period, the seller holds some amount of money from the designated rental payment that is accumulated as an equity. Rent-to-own homes are very different from the typical home-buying procedure.

5 Core elements of Rent-To-Own Homes

There are five core elements to this whole procedure

Rent Payment

This is the payment of the monthly rent that you pay on the property. One thing you need to be aware of is that the monthly rents of rent-to-own properties are higher than the average house rental payment. In this case, you are paying extra because of the right to be able to purchase that property. However long it may take the individual, sooner or later, but they have the right to be able to purchase that home property. So, it is the rent payment that you need to negotiate. This is only applicable when the buyer and seller sign the contract.

Rent Credit

A portion of your monthly payment goes down towards your down payment when you buy a property. For example, if you pay $1400 each month in rent for the next three years and 25% is credited towards the purchase at the end. So, in total you will earn a total of $12,600 ($1400* 0.25= $350; $350 *36 months=$12,600). Here also the rent is slightly higher than the total rent being charged in the area to make up for the rent credit that you will be receiving.

Purchase price

It is agreeing to when and how the purchase price is going to be determined. Are you going to give the money upfront for the property? When the contract is signed, the buyer and seller often agree on a price. This is a price higher than the market price. Another option is to ponder over it when the lease expires. In this scenario, the property’s then-current scenario is considered. Most buyers prefer to ‘lock in’ a price, especially in areas where the property prices fluctuate significantly.

Option payment

Option payment can also be considered as the down payment. When you execute your choice to purchase the home, it will add on to that total payment. This option payment is negotiable and depends on whom you work with. Some sellers will ask for a significant amount, meaning between fifteen thousand dollars and fifty thousand dollars. Also depends on the price of the home as well. Mostly, one should expect five thousand to ten thousand dollars on a mainstream home. One should always be considerate of both parties while deciding the option payment. This should be remembered that option payment is considered your commitment to purchase the property. This allows the buyer to purchase it anytime and keeps the seller from selling it. Option payment will not be returned if you return from purchasing the home. But when you do execute the purchase, it is important that you get the credit of it for the down payment.

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Option Term

It is the time period when you, the buyer, are able to execute the options. For example, the property can be on rent for two or three years, and then you buy the property. The term is not fixed. Certain states do not allow rent to own to be structured like this.

If you haven’t started your home ownership journey yet, then look no further and go to Stop Renting Perth. They help renters achieve their dream of buying a home in Perth. Their experience spans over a decade, which helps you stop renting today and buy a house in Perth.

Frequently Asked Questions

What does pre-approval on a home loan mean?

When buyers get pre-approval for rent to own homes, the speed of the house-buying process accelerates, the right amount needed to buy a house is known, and the worth of the house is known.

How long does a pre-approval take?

If all documents and information are arranged by the buyer and attached to the loan application, then it might take a few minutes for the lender to approve the loan.

How long does pre-approval last?

The buyers need to know that the home loan pre-approval will last from sixty to ninety days. So, ensure that the loan is applied within this time frame.

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