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Rent to Buy: How It Works and What You Should Consider

Rent to Buy How It Works and What You Should Consider - Rent to Buy: How It Works and What You Should Consider

Rent to buy is becoming more popular lately. It makes it easier to take the first step to owning a home without an initial mortgage. However, it's interesting not only for the tenant but also for the property owner.

Here you'll find how this type of agreement works, its pros and cons, and what aspects shall include.

What is Rent to Buy?

The rental agreement with the option to buy is a formula that allows you to live on rent for a time previously agreed. After this, the tenant will have the right to own the property for a price previously arranged with the owner.

The amounts paid for rent are totally or partially discounted from the final price, as agreed. We must know that for rent to buy we don't need a conventional contract, we'll need a double one. On the one hand, it includes the rental agreement and, on the other, the conditions of the sale.

In any case, the tenant is not obliged to buy the property. It is possible to withdraw. But it would mean losing an amount usually requested as a guarantee: the bonus of the purchase option.

Rent to buy: Advantages and disadvantages

For the one seeking a property

For the tenant, this formula represents attractive advantages:

• It is not necessary to have saved for a deposit.
• When applying for a mortgage, the amount requested will be less.
• The rent gives time to assess whether the home meets their expectations.

In return, it also has some disadvantages:

• If they are not to buy, they would lose the purchasing bonus and the rental instalments already paid.
• Although the sale price is firm, the rent can increase.

For the owner

This type of contract also has advantages for the property owner:

• Renting a property is quicker than selling it. Besides, it has tax incentives.
The rent is guaranteed since non-payment invalidates the purchase option.
• A downward trend in the real estate market will not mean losing profits at the time of sale.

As for the drawbacks, we'll highlight these two:

• The home is unavailable in case of needing urgent cash. They must wait until the moment set for the sale.
The price cannot change. Further, there is no option to sell the property to another party even when they offer a higher offer.

What should a rent-to-buy contract include?

It is essential to check every detail thoughtfully. The contract must include some fundamental aspects:

Regarding the rent: duration of the lease, term to exercise the right to buy, monthly instalments, who pays community expenses and taxes or who is responsible for reforms or improvements.

Regarding the sale: final sale price, percentage of the rental payments deducted, and the initial bonus.

Other significant elements of these contracts

In addition to the above, there are some other issues specific to a rent-to-own contract:

• The rental agreement can get extended if the owner agrees.
• The tenant has the exclusivity of the purchase unless he renounces it.
• The purchase can occur before the end of the rental contract.
• The tenant can lose the option to buy if they don't pay the rent for two months.

If you are looking for a home for rent to buy, go to Spainhouses.net and start your search. Submit your ideal location and features in the browser, and you'll find a long list of properties in a click.

Find out all the apartments and houses in Spain.

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