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Rent to Own /// Balance Transfers

Rent to Own, pros and cons:

Just a couple of years ago, you hardly ever heard the phrase "rent to own" in the market where homeowners had multiple bids to choose from. But now, with a lot of homes on the market, it’s a different game. Homeowners are much more prepared to work out rent-to-own agreements, even with people who would normally be turned down for property loans.

A rent-to-own contract typically requires a portion of the rent going toward the property that will be acquired at a later date. This contract commonly lasts two to five years at which time both parties typically begin escrow.

If you've had your home available on the market for some time, this option could let you move, while generating cash flow for your mortgage.

For buyers with poor credit rating, it is a home buying alternative worth thinking about. You may be unable to qualify for the loan now, but there are sellers who may possibly be ready to consider renting to you with an option to purchase.

Pros and cons of rent-to-own

Besides possessing time to develop a down payment and great credit rating, renters have the benefit of "trying out" the house and neighborhood. You get the benefit of locking in a sale price upfront, allowing you to acquire the home at perhaps a below-market cost in just a few years.

Not all of the money you shell out in let will go toward a ‘down payment’; your lender will have to determine how much of the rent payments are credited toward the principal and how much to closing costs.  

For instance, the home could possibly be rented by its owner for $1,800. But when negotiating the rent-to-own contract, you along with the homeowner agree that you simply will pay $2,000 a month, with $200 as your home buying credit. In the end of the three-year lease, you'll have $7,200 set aside. That cash is returned for you at the time of settlement and may be used for your personal earnest-money deposit, down payment or closing fees.

Downside? If you choose not to buy the house in the end from the lease, you probably won't get a refund. That money is generally only returned if purchase the property.

For sellers, the positive aspects are obtaining a long-term renter that will care for the property, while establishing a qualified buyer. The risk on the renter opting out of purchasing your house at lease's end generally means the market has not improved enough to make this choice worthwhile leaving you to relist the property and begin the process again.

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