Rent and Own - Renting An Apartment
When you go for renting a house or an apartment, you may be provided with an additional option of deciding whether you wish to purchase it at the expiry of the leasing term. This is the option that some prospective renters really look for; the type of renter who actually wants to have a house of his own one day, but is not prepared for it financially or emotionally.
Those who are not ready for it financially fall into several categories. A few common examples are (a) those who have not saved enough up to now to purchase a house outright and (b) those who are prevented from purchasing a house in some other way due to lack of a good credit score, or due to a bad credit score.
If You Have A Bad Credit Score
A Contract on Rent to Own is ideal for those who are prevented from buying a house in most other ways due to bad credit. On the other hand, those who do not have a good credit score may enter into a hire purchase agreement, though they would not obtain the best financial terms with good interest rates. On the contrary, they are likely to be offered mortgages with adjustable rates of interest rather fixed interest rates, and prospective renters faced with such situations may try to take more time to repair their credit ratings and come up to a high level on their credit scores before applying again.
Opting for a Rent/Own program confers many advantages to those without a good credit score and those with bad credit scores; providing them with opportunities to either collect points to make up a good credit score for the future by adhering to timely payments on the present contract; or redeem their bad records by taking advantage of the time factor to get their past bad records “erased” while adding new points to improve on the credit score by adhering to a system of timely payments.
For another category of renters who are not affected by or not interested in their credit ratings at the present moment, may be only interested in saving sufficient money on a monthly basis, so as to be able to purchase the present home at the termination of its lease.
When You Are Not Yet Ready To Purchase A House
A Rent / Own Scheme is a way of escape for those who do not feel financially mature enough to commit themselves to an ambitious program of owning a house on a given future date. They may go for this scheme knowing very well that they are only reserving an option to purchase the house if they happen to have sufficient funds at the expiry of the lease or simply forget about it, as they are in no way obliged to exercise the option to purchase.
This type of scheme could also work as a useful trial period for those who are not sure as to whether they are prepared to shoulder all the responsibilities of house ownership just yet or ever. This rental period will provide many renters with an insight into the conflicts that could arise with neighbors and how best to resolve them or stay clear of them.
They will learn how to maintain a house and garden with possibly some gardening, landscaping etc while being free of tensions and worries knowing that they are only the present custodians of the apartment / house and not the owners. Supposing they were to move into a smaller house of their own one-day, the experience gained during this trial period maintaining a larger house will be a further advantage for the renter
If the Homeowner is Not Ready to Sell
It so happens that some homeowners themselves cannot make up their minds as to when they wish to dispose of their home and hence do not give a specific date after which the renter may exercise the option to buy and own the home or not. This is due to the homeowner wanting to maximize his profits by selling at a time of high prices for housing. It is possible that the home under consideration is a home bought on mortgage by the present home owner himself and the rent he charges the present renter is set a little above his monthly mortgage so that he makes a profit on that count too for the period that he is not in occupation of the house.