benefits of rent to buy property

Rent to Buy options have numerous advantages for the Renter/Buyer and the Property Owner/Seller

Benefits for the tenant/buyer

A rent to buy contract can be tailored to the specific requirements of both parties to meet their current and future needs. This includes the amount paid as the initial deposit, monthly payment, option to purchase price and the timeframe of the option.

You can withdraw from the contract as if it were a normal tenancy agreement although all payments made would be kept by the Landlord/Seller. This offers huge flexibility to the Tenant/Buyer however there are obvious financial disadvantages should this happen because the payments made are generally higher than a standard rental agreement.

The monthly rent payments are deducted fully from the agreed option purchase price as is the initial payment, so all payments made will also be deducted from the agreed purchase price when the property is bought outright at notary.

It is a way of breaking out of the rental trap. It’s very common for tenants to be unable to save a deposit for a mortgage due to paying out a large proportion of their income on monthly rent. Banks and other lenders in Spain usually ask for between 20% – 40% of the purchase price as an initial payment. This approach allows buyers to start to buy their new home in Spain using what has been paid as an initial deposit and monthly payments as your total deposit and with interest free monthly payments during the rental period.

The rent paid is taken from the option purchase price, this effectively means that there is an interest free loan on the payments made towards the purchase of the property during this period. If a mortgage was taken out immediately there would be interest to be paid on the loan.

The pre-agreed price of the property stipulated within the contract is set for the timeframe agreed within the option. Under current market conditions this means that the property purchase price is not affected by property price inflation.

You will be living in the property that will be yours soon. You may not qualify for a mortgage or loan at the start of the contract, but you may be able to do so in a few years’ time when the option is required to be paid.

Should you become aware of any significant issues with the property during the rental period that might affect your buying decision, then you can withdraw from the contract. Usually, most issues can be rectified during the rental period and the landlord should be given the opportunity to rectify the issues.

If you are a non-Eurozone buyer, then you will also have the benefit of fluctuating exchange rates. If you have cash available or a mortgage ready you can purchase the property at any time within the contract term when exchange rates are in your favour.

Benefits for the property owner/vendor 

A Rent to Buy option is another route to the sales market, this is especially attractive to vendors if the capital from the sale is not required immediately.

A Rent to Buy option increases the number of genuine potential buyers that are interested in your property. It opens new avenues of interested purchasers, including – people that may find it difficult to acquire a mortgage, be concerned about exchange rates or unable to gain residency at that time.

Another advantage is that there will be a tenant paying rent on the property which may currently be vacant and not bringing in any income. This tenant will be genuinely interested in buying the property soon, not just renting it long-term. If for any reason the tenant/buyer cancels the contract, then the rent and initial payment which has been paid will be kept by the property owner, this will usually be a higher monthly payment than the standard amount of a rental agreement.

The rent received can help offset any mortgage repayments, community fees or expenses in general, avoiding the property being a financial liability.

Having a tenant should normally ensure the property will be looked after more than the property sitting empty which could result in damp issues, break-ins, or squatters. Rent to buy tenants will care for the property better as eventually they will own it.

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