Rent to own house is a proposition that comes good in the financial sense. People may not have saved considerable sum of money to make down payment for buying a house or their credit record may be blemished.
With rent to own, the renter is required to pay an agreed upon amount as rent per month to live in the house. The end of the contractual period (customarily three years) sees the renter taking possession of the house. This is pulled off by commingling a portion of the down payment with the rent amount each month.
The process of drawing up the contract should see careful contemplation about the sale price of the house and the rent to be charged, as the amount decided will be locked in for the rest of the term. Any deviation in property value within the contract period will be excluded from consideration.
The renter has to pay an option fee which is seller’s income if the contemplated purchase fails in future or will become part of the down payment at contract’s end. The rent premium paid by renter is typically the income for seller and is slightly above the stipulated rent.