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

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.

high rise offices of fort bonifacio business district in makati city centre of manila in the philippines

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

The World’s Smallest Homes

As we grapple with the housing-backlog issue, perhaps these tiny yet sustainable homes may provide an answer.

According to McKinsey Global Institute, addressing the worldwide shortage of affordable housing could cost $16 trillion by 2025. On the top 50 cities facing an affordability gap, New York tops the list, with Mexico City being the 15th hardest place to find a reasonably priced home. Dhaka, the capital of Bangladesh and Manila also make the list.

Home-builders and owners are starting to think laterally in reaction to the shortage of available space. Tiny homes or “micro homes” are growing in popularity. But it is not just the global housing crisis that is driving the small house movement. Some people are moving for economic reasons, green living, simpler living, and the shared economy is making ownership of equipment less of a necessity. Lamudi has taken a look around the world and discovered some of the most inspiring micro homes across the planet.

Colorado Couple Go Small and Make a Film

Christopher Smith and his partner decided they had had enough of city living and decided they would live in a 124-square-foot (11.52 square meters) mobile in the middle of nowhere. It has a small galley kitchen, a sleeping loft, and for storage, they use built-in bookshelves. Their documentary is called “A Story About Living Small.”

German Efficiency

Renzo Piano, famed for London’s Shard, has recently turned his attentions to micro homes. “Diogene” is a prototype for a tiny house built for Vitra—a German furniture company.  Amazingly, it collects, cleans, and reuses water, and supplies its power through solar modules. The house is just 79 square feet (7.340 square meters).

75-square-foot House in Rome

Marco Pierazzi knew there was some magic he could perform on an abandoned, alleyway house just a short stroll from the Pantheon in the capital city of Italy. As a skilled architect and designer, he bought it, renovated it, and for a while lived in it. He now rents what he describes as the smallest house in Italy to tourists looking for simplicity in a prime location.

Small Chinese Home on a Tricycle

In Beijing, China, the average rental price in an expensive area is $2,081 per month according to Expatistan.com. It is no wonder then that people are taking to wheels. The Beijing People’s Architecture Office have built a home so small it can be folded up and carted on the back of a tricycle. The bed becomes a dining table; the countertop transforms into a bench for seating. At just 33 square feet (3.06 square meter), you can bring it anywhere.

World’s Smallest House

In Berlin, Germany, the architect Van Bo Le-Mentzal has put together a home with just enough room to lie down. It is more of a thought experiment than a solution to economic housing, and it is definitely more suitable to a hamster than a human; hopefully no human will ever have to live in something like this. At just 11 square feet (1.02 square meter), it tops the Lamudi list of the world’s tiniest houses.