Rent to own is a type of financing arrangement that gives the tenant the opportunity to buy the property they are renting, after a certain period.
In our case, our tenant pays an establishment fee, a market rent and gets a right to buy the property at a predetermined price. If the market price for the home in question has risen more than the predetermined price, our customer keeps the entire difference and uses it as equity when buying out the home in the future.
Since we are not a property developer, we are free to invest in any real estate to be able to offer rent to own agreements. This also includes homes on the secondary market that our customers can choose on finn.no that we buy, so that they can move in straight away and start saving for equity.
The alternative is new homes which usually have an occupancy date 2 to 3 years in the future, once the construction is finalised. You get a new real estate, but on the other hand you have to wait to both move in and put off getting a foot into the housing market for several years.
You choose the home, we finance it.
Following the purchase, we sign a three-year lease and give you a right to buy the property at a specific price. The cost of the right to purchase will be an establishment fee that is paid only once. You then pay a market rent during the lease period. You can buy us out during or at the end of the rental period. If the market price for the home in question has risen more than the predetermined price, you keep the entire difference and use it as equity when buying out the home in the future.
Additionally, part of the monthly rent can be used to build up equity in the property. In that case, this will be an optional extra payment on a monthly basis, which will be reserved for the home's equity. This is deposited into a savings account in the customer's name at our partner bank.
The lease usually lasts for three years, but based on your finances we can look at longer agreements. Our goal is that you take advantage of the right to buy and eventually become a home owner. However, you are not bound to use the right to buy and can choose to end the lease and move out.
In the application, one must typically provide the same information that a bank will ask for when assessing a mortgage application, including identification and your finances such as fixed income, free equity and any loans. We are looking for customers who have stable and orderly finances, who have the ability to pay the rent on time, and who will have the ability to buy the home at the end of the agreement. We will make arrangements for you to succeed in this.
The advantages of rent to own include that tenants can build up equity that can be used when purchasing the property in the future. It can also be a good solution for people who do not have enough money to buy a property right away, but who want to own their own home in the long term.
Since you as a customer get a fixed purchase price to deal with, you keep the entire increase in value beyond that price on the day you choose to exercise the purchase right. In addition, you can choose to pay a higher rent amount where the excess can be deposited into a savings account which is used for future equity.
While rent-to-own can be an attractive way to enter the housing market for some people, there are also some disadvantages that should be considered. When you sign a rent-to-own agreement, you are paying for a right to buy the home after the lease term is up
If you change your mind, you can lose the money you have paid for the option, which in our case is the establishment fee. We share the value in the home, which means you have the full upside potential after our mark-up, which you would not have if you bought the property straight away .
But, in any case, you get a foot into the market, which you would otherwise not have had the opportunity to do, if you do not have equity capital.
No. You only have a right, but not an obligation, to buy the property. If you use the right to buy the home, we have an obligation to sell it to you in accordance with the agreement between us.