For some families, there are many factors that hinder their ability to purchase their first home. Needless to say financial challenges are at the top of the list. Potential home buyers are often enticed with rent-to-own (RTO) options to help achieve their dreams. But, is it worth it in the long run?
According to a recent article in the Financial Post, choosing the rent-to-own option could make it less affordable to actually own a home. There is one belief that promotes this option as an affordable alternative for those with credit issues or having difficulty coming up with the down payment. According to the article, rent-to-own options are not simplistic and prospective buyers should be aware of what’s involved in this process.
A rent-to-own contract typically will list the future purchase price and date of property transfer. Renters may like this option because the price appears to be locked in. However, these new home owners may encounter higher interest rates in the future. The “loan-to-value” will cause their interest rate to increase. And, since the price is locked in, it still won’t change if the market price of the house goes up or down. In addition, the rent will be more than a normal rental property since a portion is allocated to the purchase price. Even before the property is transferred over, the renter will be responsible for the maintenance. So, it’s imperative for prospective buyers to understand the terms of their agreement prior to making any commitments.
Every family’s situation is unique and there should never be a ‘one-size-fits-all’ approach. Above all, your financial situation must be carefully considered when making investment decisions. Purchasing your first home doesn’t have to be a daunting process; and, you don’t have to compromise your finances to make your dreams come true. Since 2006 Azim Rizvee and the MinMaxx team have helped thousands of families achieve peace of mind while finding their new home. Do you have questions about buying or selling? We’re here to help, so contact us to get all your questions answered! Phone: 416-264-1111/Toll Free: 1-888-MIN-MAXX or Email: [email protected]