Updated March 30, 2017
Does Rent-to-Own really make getting a house easier? Discover how it works.
Despite working night shifts, braving the rains just to get to work, and drinking cups after cups of coffee to keep awake at work, we seem not to earn enough to give the best to our families.
When we want the best life for our families, then this also involves providing meals three times a day, education for the kids, a vacation every now and then, and a roof above their heads.
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How Does Rent to Own Work
A lot of Filipinos aspire to get a house they can call their own, yet according to the National Convention on Statistics only about 30% of families in Metro Manila wants to acquire their own house. It seems a bit off from what one may expect, yet we have to see the reasons why many do not plan to get a house.
Almost half of the families in Metro Manila are already home owners, however, the other half do not. What could be stopping them? The top reasons next to already owning a house are: no regular employments and have regular employments but cannot afford it. Simply put, they think they are not financially capable to buy a home. Purchasing is the most common way of acquiring a house, and if you are one of those wishing you own the house you are renting, then you can consider the Rent-to-Own scheme.
When you are renting an apartment or a house, there are a couple of advantages and disadvantages. When you need to move, you can do so without worrying about the home you are leaving. Whenever something is broken such as clogged toilet and sink, your home owner will be the one to shoulder the costs.
For those fancying condos and houses in high-end parts of Manila, you can experience living in these expensive places without having to buy it. The rent will be steeper than other places, and you can’t renovate the place since you are just renting. You may rent the place for 10 years of more, but you will never own it unless you are renting to own.
3 Common Rent-to-Own Scenarios
- 10+10+80 Payment Scheme
With the 10+10+80 RTO Scheme, the buyer will pay the 10% down payment out right. The buyer then moves in and rent the house with additional payments to pay off the other 10% of the down payments in 2 years.
After 24 months, when a total of 20%down payment has been cleared, the buyer can then start looking for financing options to buy the house. The buyer can get a mortgage from a bank of getting a housing loan from PAGIBIG or other financial institutions.
- Reservation Scheme
The buyer can reserve the place by paying the reservation scheme and passing the capacity-to-pay requirements. After paying the 2 months’ deposit the buyer can move in and give the owner postdated checks for the monthly rental.
The bank account of the postdated checks has to be kept open with enough money to avoid forfeiture of the contract. As soon as 20% of the value of the house or condo has been paid off, the buyer can start paying the remaining 80% through loans, cash or bank mortgage.
- Rent-with-an-Option-to-Buy Scheme
A contract will be drafted according to the agreement between both parties. The contract must include the specific monthly rental, the actual sales price of the house or condo and the interest rate. As a buyer, you must read the term and conditions very carefully.
This contract tends to be messy if you are dealing with a cunning owner. After the lease contract ends, then you have to decide whether you will buy the property. Some owners might ask for an Option Fee. Make sure this is included in the contract. The contract is legal and binding that even lawyers can prepare it for you.
Rent to Own Home Pros and Cons
The buyer can be assured that the owner can no longer ask for an increased price even if the market potentially increases its value over time. Within two years, you can build up your credit score and you can save money to eventually pay for the house. The best part is you can try out living in the place for a year or two. If you don’t find it cozy, then you can easily leave the place.
Since your monthly payment will include part of the down payment, you will be paying a higher price. And should you decide not to buy the property, you will not be able to reimburse the down payment. You only have two years to save up the remaining money needed to buy the house. The owner might also use the contract to create very strict payment policies. Failure to pay on time might cause you to void the contract.
Some owners trick buyers through created terms that are a bit tricky, since you have been paying higher rates, they will have higher income, however since the policy is you can’t refund the down payment should the contract is cancelled, some seller will take advantage of it and will find a way to kick you out before the contract ends. Then they will find another buyer.
If you need more cash to pay out the remaining equity of your home, then start processing your loan from Cash Mart. Cash Mart is a reliable online moneylender which delivers quality loans as soon as you need it.