How Does Rent to Buy Work

It is not uncommon that many houses for sell remain in the market for an indefinite period of time because of lack of buyers.

Because of this fact, a scheme called rent to buy has been formulated for both the seller and the buyer to close a deal. Read and learn how this works.

One of the issues of landlords when they decide to sell their house is the lack of buyers coming their way. This is understood considering that not many have the financial capacity or a good credit name to directly buy a house. The result of this is an indefinite period of waiting time before the property is put under the status of being sold. In order for the landlords to cut this duration of long wait until their property is sold, a scheme called rent to buy has been formulated. This is sometimes called lease to buy contracts.

But with all the jargons involved in the title of the scheme, most people are confused on how does rent to buy work. Below is a simple explanation of this scheme from the point of view of the tenant or the buyer with the help of lease option provider.

The Gist of How Does Rent to Buy Work

There may be some confusing connotation of how this scheme works but the straightforward intention of rent to buy is that the lease option provider will acquire the property/home for you. This can be done by buying the house on your behalf or by acquiring it by working with the landlords. You can then move in as a rent-paying tenant. The catch of the deal is that you have the option to buy the house after an agreed period of time, usually three to five years. It must be clear to notice in the contract that you have the ‘option to buy the house,’ meaning you are not obliged to buy the house even after the agreed period of time has elapsed.

Upfront Payment

The need for an upfront payment in this kind of scheme is necessary. Yet, this initial payment is usually two percent lower than what usually mortgage lenders ask from any buyer. This payment is knocked off from the agreed price of the property.

The Benefits of this Kind of Scheme

The most obvious benefits of how does buy to rent work is that it is a better deal compared from the traditional purchase. The buyer does not have to straight away get a mortgage to move in the house and there is a modest period of time to improve one’s financial position so that a buy can be closed.


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