Renting or Buying - that is the Question
The consensus has always been that buying a home is a better option to renting one, and there are reasons to back this up, namely;
- Return on Investment When you buy property, its value appreciates in the long term, which means that you can cash in on your investment in the future . Even through a housing crash, history has shown that property value appreciates in the aftermath
- Independence When you buy, it’s yours to do as you please. Whatever you decide to do to improve your comfort or increase your return on investment is up to you and your imagination.
- Pay less Tax The benefits of owning a home is that you can offset the interest you pay on your mortgage while filing your taxes. So your mortgage payments are actually lower than you anticipate
- Equity At the end of your mortgage, your home becomes your 100% owned asset that you can use as leverage and aspire to better, bigger things.
By all accounts, there is no advantage to be derived from renting a home, because buying has all the aces in ownership or investment, despite the disadvantages of upfront capital, and maintenance costs associated with it.
Except of course, not everyone has access to capital, which is one of the highest barriers to entry in buying. So what are their options?
Rent to Own
Rent to buy or Rent to Own, is a program that’s been around for a while and began in Europe in the 1950s. The idea behind the strategy was to provide the framework that would enable renters transition to home ownership status, using mechanisms that aggregated and leveraged their rental payments into mortgages.
It put ownership within the grasps of renters, created more ownership of homes, which grew enterprise and the economy; making it popular, and another avenue for creating home ownership in the Real Estate market.
Simply put; a renter pays for a property they occupy, usually monthly, which can then be transitioned into a mortgage payment at an agreed time – usually 3 years – between the renter and landlord. There are legal terms that support this kind of agreement, mainly to protect both parties, but the most simplistic view would be just that – transitioning rent to a mortgage.
Because the transition period begins at year 3 of the arrangement, the provider of the program would already be in possession of all the financial requirements and obligations normally requested before you can buy house.
The renter would have proven their ability and consistency in meeting the responsibility entrusted to a home buyer, with the bonus of potentially dealing with the same lender, that offered the program.
Keeping everything in-house, means that the renter’s needs are assessed and organized in one place, without being handicapped by lack of capital or weak credit scores, which combines to make the transaction a seamless one.
Who can Benefit
Rent- to-buy can benefit people;
- Who have weaker credit scores that prevent them from qualifying for traditional mortgages
- Persons who may be unable to afford the down payment for mortgages which fluctuates between 2% -5% depending on the economy and inflation.
- Persons or families that have suffered divorce or bereavement, and therefore find themselves unable to cope financially especially with accommodation
- For sellers that do not wish to sell immediately, this could help earn income in the short term, while transitioning to a sell a property
Rent-to-Buy is not limited to these categories and applies as an option to anyone who falls short of the affordability of buying a home or obtaining a mortgage – including current renters.
If you’re renting right now, and need quick, additional information about this, or just need to discuss your options, contact me for a no-obligation chat.
Rent to Own Homes Are Available
You can qualify for an ongoing Rent to Own program, which enables you to:
1. Buy your own home with approval for up to $400k
2. You can live in your home, paying a rental fee for up to 3 years
3. At the end of 3 years, you decide if you wan to buy or move – without any obligation.