Timing is everything. Trying to buy a house right now? You missed the window. That window is something people struggle to understand and that applies to almost anything. Obviously, it’s smart to buy low and sell high, but what if the prices are too high right now? Are you supposed to wait for them to go down? That may work for the stock market but when you are talking about buying a home, waiting may not be the best option.
Rent to Own: The Time is Now
Rent prices are skyrocketing, interest rates are climbing all the time and the cost to borrow money may exceed the value it gives you. People are stuck in a situation where they do not know what to do as far as where to live. They had the opportunity to buy but they missed the window and now might have to rent for another year or longer. Now if they want to buy a home, even if the asking price is reasonable to them, they would have to pay more each year with increased interest rates. That difference could mean thousands a year which most cannot afford.
So, you are not able to purchase a home right now which means the only option left is to rent, correct? Actually, that’s not the case and a new opportunity will be available to those looking to buy a home very quickly. Rent to own agreements usually increase once interest rates go up. This agreement, which is still the selling of a home to someone else, allows the buyer to pay usually a smaller down payment and then a month rent to the owner until they have paid off the entire asking price. This agreement allows the buyer to get the home without having to borrow any money.
Understanding The Value Of Rent To Own
For the buyer, a rent to own agreement may actually offer advantages that regular home buyers will not have. For example, if you find a property available for $450,000 but it requires a lot of work, the seller may be having a hard time finding a buyer. If they begin to drop their prices, a RTO agreement may be optional. At that asking price, the down payment would have to be $90,000 in order to hit 20% and avoid mortgage insurance which could add thousands of dollars of expenses to your mortgage on top of the principle, interest, insurance and taxes.
In this situation, the buyer could make a deal where they provide a smaller downpayment under a RTO agreement where the down payment would go directly to the owner and then the renter could use the rest of the funds to make improvements to the propety. While these improvements are being made, the owner is still getting paid monthly for the property but is not responsible for the work being done.
That means the person who was not able to buy a house because of higher interest rates not only is able to buy a house, but now can upgrade the property as they see fit. They also will save on interest rates and be able to pay off the property sooner.
Why Now Is The Best Time To Look For These Offers
This type of transaction is common but the key thing about a rent-to-own deal is the timing. Buyers usually prefer the lump sum option. However, if they are unable to find a reasonable offer and are being forced to lower their asking price, the RTO option works better for them as well.
Knowing the options available to you will not only help you to save money, but will also allow you to take advantage of the different markets and know when the best time is to utilize certain options. In real estate, the solution to higher interest rates is usually a rent-to-own agreement.
