Today, the saturated and highly competitive real estate market makes it difficult for sellers to find potential buyers. In addition, buyers who take out a mortgage find it challenging to secure a loan and fail to purchase the home they want. Therefore, engaging in a rent-to-own scheme is the best option for buyers and sellers.
Rent-to-own (RTO), also known as a “lease-to-buy” or “lease-to-own” scheme, is an agreement made between a renter (buyer) and the owner (seller), wherein, the buyer has the option to purchase a leased property from the seller within a specified period of time. Simply speaking, the buyer is allowed to rent the home with the goal of acquiring the house and lot during the rental period or until the term of the loan expires. If you’re planning to purchase a rent-to-own property in the Philippines soon, you should begin your research by asking these five (5) important questions.
1. How does rent-to-own work in the Philippines?
At the beginning of the arrangement, both parties involved should specify the monthly rental fee, purchase date, sales price, and interest terms, if applicable. Once the terms are agreed upon, the contract is drafted and signed. Remember that whatever price is stipulated in the contract, especially with regard to the sales price, is final and cannot be changed regardless of any increase or decrease in the property value during the lease period. Before you sign any contract, make sure that you fully understand what you are agreeing to.
In comparison to traditional financing, rent-to-own is owner financed. It means that the owner provides financing or is making a loan directly to the buyer. This results in a slightly higher rent that is above the market rate. A portion of the rent will cover the downpayment for the property in case the lessee decides to purchase it. If that is the case, the lessee must secure financing, either from a bank or lending institution, to pay for the remaining balance. However, if the lessee decides not to push through and vacate the property, all the paid rent stays with the lessor, which is his/her incentive for taking the house and lot off the market while it was being rented.
2. What are the benefits of a rent-to-own property for buyers?
● Buyers are able to acquire a home immediately and have ample time to settle in. This allows you to improve your finances and credit scores before the lease duration ends.
● Buyers can “test drive” the home and live in the property within an agreed period of time for renting it. If you decide that this is not the one for you, you can walk away and start looking for another property elsewhere.
● Buyers get to pay a fixed total contract price even if the property appreciates in value. You can lock the property’s present price even if the actual purchase may happen after the end of the lease term.
3. What are the potential risks associated with a rent-to-own scheme?
Any financing arrangement entails possible risks and the following are some points to expect. This can be avoided if both parties, the buyer and the seller, ensure that all points and concerns are addressed in the contract.
● The main disadvantage for buyers is that if they choose not to purchase, all rent payments will be forfeited.
● If the property value depreciates during the lease period, the lessee would end up paying above the market value.
● When the lessee falls behind rent payments, you may get evicted and would lose the downpayment and all previous rent payments.
● There is a possibility of the lessor being unable to pay the mortgage, in which the paid rent may be forfeited and the potential buyer will not be able to purchase the property.
4. What are the things to consider with a rent-to-own property?
● You must work with professionals, such as lawyers and brokers, to create a well-drafted contract that is important to help you avoid future disagreements. Retain the lawyer to thoroughly review the contract prior to signing, if necessary.
● The monthly rental fees, purchase date, duration of lease term, rent-to-own premium, total contract price, and all other clauses must be covered and finalized in the contract.
● There is no limit to the provisions that can be included in the contract, however, you must protect all of your interests to avoid legal conflicts in the future.
● Apart from the fundamental terms stated, you must also agree on the number of tenants permitted in the home, future improvements, and pet policies, among others. Follow stricter policies, or otherwise, the contract will be void.
● Understand laws concerning RTOs in the Philippines, specifically the Rental Reform Act of 2002 (RA 9161), to avoid false violations.
● Plan for the future. Ask yourself these questions: “Am I able to commit to paying the monthly rent?” or “How will I continue paying if there are unexpected circumstances?”
● Be ready to pay a higher regular rental fee for the rent-to-own premium. You also have to be prepared for any appreciation or depreciation of the property’s value.
● If you decide not to buy the property after the lease duration, all the previous payments made, including the premium fee, are forfeited and non-refundable.
5. Does Bria Homes offer rent-to-own properties?
Bria Homes, one of the leading housing developers in the Philippines, offers a variety of high-quality and affordable house and lot packages, condominium units, and rent-to-own properties across the country. This is surrounded by a comfortable, safe, and friendly community that is a perfect place for your family to live in. You can avail of your own Bria Homes through a PAG-IBIG housing loan or bank housing loan, such as the ones offered by AllBank, BDO, PNB, UCPB, and other preferred banks.
For instance, the Bettina Townhouse at Bria Homes Calamba has prices starting at Php1,641,000 for a 2 bedroom, 1 toilet & bath, carport, and Provision for a service area. This has a minimum lot area of 36 sq. m and a floor area of 44 sq. m. The sample computation amounts to a downpayment of Php205,125 and a reservation fee of Php10,000. The balance of the downpayment after the reservation fee is Php195,125, which is payable in 20 months at Php9,756 per month.
Meanwhile, the loanable amount is Php1,435,875 with a monthly amortization of Php12,010 per month (20 years to pay) or Php13,722 per month (15 years to pay). The price and payment plans may change without prior notice. Read this article to be guided on how to apply for a PAG-IBIG housing loan.
Real estate typically rises in value, thus, it is a good investment for everyone, especially for young professionals. Imagine having a property under your name and enjoying the amenities and services provided with it. Bria Homes’ rent-to-own property scheme is a better opportunity for you and your family, as well as your future self and future family, to acquire your own property despite lacking the finance and credit score. You can even tick two checks towards financial freedom with your property and investment.
Applying for a Bria Homes is very easy with a lot of available and affordable options to choose from. You can inquire about the Bettina Townhouse and browse other packages here. Whatever you choose from, Bria Homes will guide you in every step of acquiring your own property!
Written by Gianne D. Inumerable