INSURANCE AGENCY NETWORK Blog
To have a house of your own is on everyone’s bucket list. It may be a simple one-story house or a condo unit, it doesn’t matter as long as the property title reflects your name as the owner.
The most basic way to purchase a home is for the buyer to pay the seller the amount of the property and the deal is closed. Another possibility is to have home mortgage instead. Unfortunately, for the buyer to be able to get a loan and have cash for a down payment and a good credit score. Not everyone can do that.
But, don’t lose hope on that dream house, another option is the rent-to-own agreement.
Here are five frequently asked questions about this option that may help you finally score that dream house.
1. I read option money in the contract. What is it?
Option money refers to the one-time and usually nonrefundable fee that the buyer pays the seller. This gives you the option to purchase the house in the future. In your contract, note that it gives you the right but not the obligation to purchase the property when the lease expires. If you decide not to purchase the property at the end of the lease, it just expires.
2. How is purchase price determined?
This is an important part of the contract that you have to agree upon with the seller. In some cases, the buyer and seller agree on a purchase price when the contract is signed – often at or higher than the current market value. Some would agree when the lease expires based on market value.
3. Do I still need to pay rent?
Yes, you still need to pay the seller a specified amount of rent. This is usually on a monthly basis. The lease term is negotiable but frequently ranges from one to three years. In some contracts, a percentage of the monthly rent is applied to the purchase price.
4. What happens if I don’t want to buy the property anymore?
If you finally decided not to buy the property at the end of the lease term, the option expires. However, you forfeit any money that you paid at that point, including the option money and any rent credit earned.
With a rent-to-own property, your dreams of owning your own home may come true. Rent-to-own agreements can also include tricky insurance considerations so make sure you’re working with a qualified agency. At Insurance Services of the West, our agents take pride in making sure that clients are well-protected at prices they can afford. To learn more about how we can help you, please contact our agency at (425) 681-0996 or Click Here to request a free quote.