QuoteReplyTopic: rent to buy deals - how do they work??? Posted: 21 August 2008 at 10:31pm
The house that we really want to buy is being offered as a rent to buy as well as the normal way of buying...
How do rent to buys work????
I said to DH that if the mortgage doesnt happen then we should think about the rent to buy for it but hes really weary of it, mainly because we dont know much about it if anything really.....
Rent to buy usually is a last resort. How it usually works, is you pay quite high payments per week, made up of the market rental for the house plus a percentage on top of that to cover payments into a "deposit". After 3 or 5 years or so, you've built up enough of a "deposit" to go to the bank and get a normal mortgage to fully buy the house. You don't own the house at all, it's very much like renting for the first few years, with compulsory savings, which ends up as your deposit. In some ways it can be good, as you normally sign an agreement at the start of the rent to buy, which sets the price of the house, payments etc and that price is what you pay after the 3 or 5 years or however long it's set at. However, it can also be a bad thing if house prices drop, as you are stuck with that price you signed at as well, which may be over what the house is worth at the time you actually buy it.
My dad said Rent to buy the Landlord is the one thats making all the money and as Mini8ka said it is a bit risky with prices etc..... BUt it works for people who can't get the big deposit to buy their first home to get into one
Definately only a good idea if you plan on staying in the house a very very long time with the way the housing market is at the moment so if it is the perfect place for you and will be for years to come then you wont end up regretting being tied into it if you cant get a morgage - thats my view on it anyway
These are an old-fashioned way to go, generally they work particularly well when the Vendor and Purchaser know each other. If you can get your own mortgage, it's generally more favourable as you will be more "independent". You could ask the real estate agent what sort of terms they are looking for.
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rent to buy deals - how do they work???
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