How Rent-to-Own Works for Filipino Families
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.
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 homeowners, however, the other half do not. What could be stopping them? The top reasons next to already owning a house are: no regular employment and have regular employment 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 homeowner 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 or more, but you will never own it unless you are renting to own.
3 Common Rent-to-Own Scenarios
Rent to own Philippines is more achievable if you consider the most practical scenarios.
10+10+80 Payment Scheme
With the 10+10+80 RTO Scheme, the buyer will pay the 10% down payment outright. The buyer then moves in and rents the house with additional payments to pay off the other 10% of the down payments in two (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, or get a housing loan from PAGIBIG or other financial institutions with various loan solutions.
The buyer can reserve the place by paying the reservation 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 the 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.
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 carefully.
This contract tends to be messy if you deal with a cunning owner. After the lease contract ends, you must 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 House Pros and Cons
Rent to own Philippines properties is not all fairy tales. Despite the benefits you gain from it, there are downsides too.
Advantages of Rent-to-Own
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 save money to eventually pay for the house.
The best part is you can try living in the place for a year or two. You can easily leave the place if you don’t find it cozy.
Disadvantages of Rent-to-Own
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 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 tricky since you have been paying higher rates. And they will have a higher income. However, since the policy is you can’t refund the down payment should the contract is canceled, 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 an online lending company in the Philippines which delivers quality loans as soon as you need them.