Rent to own...

[Iceman_19]

Can someone with some knowledge explain how this can work without the buyer getting completely rammed? Or is it like a no credit no problem loan? You get screwed no matter what?

[JordanAndrew]

yup, you end up paying very little to actually paying off the house. Don't do it.

[el-nino]

Hey,
Lets say your rent is 1500/month. Non of that money goes towards the down payment.
Whatever money you put on top of the 1500 will go towards the down. It MUST stay in a lawyers account.
So lets say you agree to put 500 extra a month. In one year you have 6k towards the down payment.
I hope that helps.

[vtec4life]

just rent. or own. if you rent to own you will end up paying $350K for a $320K home. your agreeing on a future value of the property when you sign the paper am I right?

[Xtrema]

RTO is for people with no credit (like immigrants) but still try to own a house.

Most of the time, RTO is in favor of landlord. The reason for RTO is if you really worried about being priced out in the future.

[ringmaster]

Originally posted by Iceman_19
Can someone with some knowledge explain how this can work without the buyer getting completely rammed? Or is it like a no credit no problem loan? You get screwed no matter what?

Rent to own is a means of employing another person's good credit in order to obtain financing. The person who is "offering" the rent to own needs to charge the renter a bit of a premium for the risk that they are taking on. That is, the risk that the renter will destroy the house, not make rent payments, etc..

The best case for the person offering the rent to own is if the renter can't obtain their own financing at the end of the rent to own period.

[dawerks]

If you go for RTO, go for an open ended or open clause on the agreement for sale.

That way if you can't get the mortgage in 2 years on your own name, you have the option of going to 3-4-5 years.

It's win win (usually the later years will be more expensive). This also gets rid of the 'scamish' part of the agreement.

The person entering the RTO KNOWS they are getting an overpriced house, but that's how deals are done. They pay more or they get no house.

Alberta used to have awesome assumable mortgages and you could make an easy 20-40K overnight but those days are long gone. :(

[tpurcell4]

Another thing to consider when going with an RTO, is what is your future situation going to look like. If you have no credit or bad credit now, you want to ensure that in 2 years (or what ever you agreement happens to be) you can qualify to buy the home. This program works best for people with good jobs, good cash, but you do not want to pay the ridiculous interest rates that equity loans have. Ideally in two years you will be assuming a 5 year fixed mortgage at today's rates, and in order to assume that mortgage you must be able to qualify. So you will need at least a 600 beacon score or higher (650+ would be better), and any other factors that are affecting your ability to qualify now must be taken care of as well.

It is in your best interest if you are going to go ahead with the RTO to sit down with someone to work out a budget and a plan to get yourself to where you need to be in 2 years. Then this program will be in your favor.