top of page

How Rent to Own works: Owners

Are you looking to rent or sell your home, is the mortgage becoming a bit more than you can handle? If so Rent to own maybe the best option to find a sale at a great price, but how does it work.

Well just like a bank can offer a mortgage you can too and you can do this while you have a current mortgage arrangement in place. The terms rent to own, private financing, lease to own, in-house financing all have a but of overlap but simply put these are means to receive or extend alternative financing outside of the traditional means.

To give this consideration there are a cope things that you want to be certain of first.

  1. Is your mortgage in good standing? You've paid your mortgage on time for a period in excess of six months.

  2. Are all beneficial owners in agreement? If you own the home jointly with others you would need to have an agreement from all parties.

  3. Are you really ready to move? on many occasions we have had people us as real estate agents to sell bu they aren't ready to move. So be certain that you are ready to tell your'e home good bye.

If you're still on board then let's talk about how this works.

  1. Private Mortgage This method of private finance is nearly identical to the kind of mortgage most owners have and feature most of the same elements. The features of a traditional mortgage include an interest rate, amortization or repayment, period, and down payment. This method works best when the owner is willing to finance a property long term with no short term buy-out period. Traditional mortgages are interest focused in the first few years and the mortgager's principal payment becomes more substantial in the latter part of the mortgage term.

  2. Rent to Own This method of private financing is for shorter term arrangements and has different features. This method features a down payment and monthly payment but does use interest as a means to generate profit for the owner but rather uses hybrid monthly installments to address the "rental payment" and a portion goes directly to principal. So let's assume you would normally rent your home for $2,500 per month, the monthly installment using this option might be $3,200 monthly with $700 going to principal balance monthly and the remainder being considered rent. The full payment in this method is negotiated but may be anywhere from 2-5 years but could be more or less depending on mutual preferences and negotiation. At this time the purchaser would have already paid their deposit, inclusive of those principle payments made throughout the rental term and now they would be seeking financing from a financial institution for the remainder.

These methods of financing provide a suitable and lucrative alternative for motivated homeowners as the down payments in rent to own arrangements are often times larger than the traditional 5% and could nearly immediately be used to help with your transition to you next place of residence. The risk is relatively low as you still hold the conveyance just like a bank so they don't own thew home until you have full payment. The contract just like that of a mortgage clearly speaks to what would happen if there's late or nonpayment and monthly payments and reporting can be managed by an agency. As a recap this option makes your home more sellable and able to yield it's full or above market value and generate considerable profit from either interest or sales price. If you are interested let's have a call to discuss the next steps.

127 views0 comments


Matt Sweeting Bahamas Real Estate Member.jpg
bottom of page