Which Is Better: Rent-To-Own or In-House Financing?

Wazzup Pilipinas!

Top property marketplace Lamudi Philippines compares common housing payment schemes to let buyers choose which one suits them best

In a bid to provide end-to-end service to all home-hunters, Lamudi continues to share assistance through valuable information that will arm investors in their real estate transactions. Before you head on to the Lamudi Affordable Housing Fair and browse properties you can soon own, know first which the best option is: rent to own or in-house financing?



Rent-to-Own

Rent-to-own or lease-to-buy is an agreement that guarantees a renter the option of buying a leased property within a pre-arranged duration. Basically, it is being able to rent a home that you can buy at some stage in the rental period. A well-drafted contract is key in rent-to-own terms. Both parties must consent to the specifics, including rental rates plus rent-to-own premium, purchase date, duration of lease term, actual sale price, and all other essential clauses that must be finalized.

A rent-to-own scheme is appropriate for buyers who cannot afford to pay for a huge down-payment in one go as the duration of the lease—which normally lasts for two or more years—allows them to save enough cash and build their creditworthiness. For some people, owning a home is much for feasible this way.

One advantage of a rent-to-own transaction is that the buyer can lock the property’s present price even though the actual purchase may happen after the end of the lease term. In addition, in the event that you find the property or the neighborhood unsuitable, you can also decide to leave the property at the end of the lease term and look elsewhere. However, there are a number of caveats that must be considered before jumping into the rent-to-own bandwagon.

It is normally stipulated in the rent-to-own contract that the lessor/buyer will pay a rent-to-own premium on top of the monthly rent. For example, if the monthly rent of a certain condo in Makati is Php25,000, the rent-to-own contract may stipulate that the lessor/buyer will pay an additional Php8,000 per month as rent-to-own premium. This premium will make up part of the eventual down-payment at the time the lessor is to buy the property per the contract. If the lessor has paid 24 months of rent-to-own premium, they have accumulated a total of Php192,000.

Furthermore, as the intention to buy the property is already stipulated in the contract, the lessor agrees that they will eventually make the purchase upon the expiration of the lease term. If they don’t, then the contract may also stipulate that all rent-to-own premium paid will be forfeited.



In-house Financing

For buyers who want to pay for their properties in a series of installments without availing the offerings of third-party institutions, such as banks and other lenders, real estate developers also offer in-house financing.

Technically in-house financing is not considered a loan but an extended way of payment. Application is easy as developers are generally less stringent than commercial banks; with just valid identifications and enough proof of income you can already purchase a property. This usually applies to pre-selling projects of various developers for faster take-up. Likewise, many developers do not offer financing for move-in-ready units.

The setback is steeper interest rates and shorter payment terms. The high and fixed interest fees offered by real estate developers are way above the normal range accessible in banks. Payment duration offered is also shorter than the usual 10 to 15 years in banks or the up to 30 years offering of Pag-IBIG Fund.

Before finally deciding to enter a big financial commitment like real estate mortgages, it is very important to evaluate your current financial standing to be able to decide which term best fits your needs. If fast, worry-free, and easily approved scheme is your best bet, then in-house financing will work for you. Alternatively, if you prefer to move-in right away and rent a home that you can eventually buy, then gear up and find the best rent-to-own properties up for grabs at the Lamudi Affordable Housing Fair.



Lamudi Affordable Housing Fair

Slated to happen on July 15 and 16 at the Glorietta 3 Activity Center in Makati City, the Lamudi Affordable Housing Fair will display a wide-range of value-for-money properties with the easiest payment terms. The event is also packed with exclusive discounts and exciting freebies and promos can also be yours at the two-day housing fair.

Foreclosed property auctions, virtual reality in real estate, home-buying seminars, and forums facilitated by experts will simultaneously happen at the event.

The first Lamudi Housing Fair was successfully held November of last year and was attended by more than 5,000 visitors. The upcoming housing edition focusing on reasonably priced properties is expecting more attendees.


To know more about the Lamudi Affordable Housing Fair, visit http://www.lamudi.com.ph/events