Let’s face it, it’s hard getting a mortgage.
I know I’ve tried and thousands of other Bahamians have tried, with little to no success.
What this means is that out of every 10 mortgage applications, only 4 of them are approved. The report mentioned doesn’t state how much the mortgages are approved for (dollar value) and whether they are for vacant land, new construction or an existing building attached to a property.
Here’s a few reasons why Renting To Own (RTO) makes perfect sense for the average Bahamian:
- No Mortgage Qualification Necessary – You don’t need a mortgage to get started with a Rent To Own Contract. This is because you are dealing directly with the seller of that property.
While we try our best and would like to know what you are able to qualify for in the future, it is not a mandatory requirement.
- No Upfront Closing Costs – When purchasing real estate outright (with cash or a mortgage) there are closing costs you have to pay. These costs include; VAT and Stamp Tax(10%), Mortgage Commitment Fees (1%), Life Insurance, Property Title Searches, Appraisals, Lawyer Fees (2%), and other associated costs.
You see now how expensive buying real estate can be and when added up, these costs can run into thousands or tens of thousands of dollars.
Don’t forget you already have to pay 5% as an upfront deposit on top of those fees.
- Negotiable Payment Options – The contracts can be negotiated. If you would like to change the deposit, monthly payment, purchase price or the length of the Rent To Own Agreement, you have the ability to make an offer favorable for you.
We do not guarantee that your negotiations will be accepted, however, you are still able to submit a new offer, unlike a conventional mortgage, where you have to pay what the bank requires you to pay.
- Lower Your Balance Before Getting A Mortgage – Through the initial deposit and the rent credit included in your monthly payments, you are reducing your balance owed to the seller every month.The average RTO contract has a reduction of at least $18,000.00 – $25,000.00 off of the purchase price during the time of the contract.
This means that if you started at a purchase price of $150,000.00, and have submitted a deposit of $10,000.00 and your rent credit for three years has accumulated to $18,000.00, you would have reduced your purchase price to $122,000.00 ($150,000.00 – $10,000.00 – $18,000.00), which is a much lower balance than the original purchase price.
- Makes It Easier To Get A Mortgage In The Future – Through the reduction in the Purchase Price, this lower amount can help to make it easier for you to receive approval from the Bank for the mortgage, especially if you can show proof that you’ve made payments on time every month for the total time of your contract.
Having a good track record during your RTO contract is important and shows the bank that you have the ability to meet your obligations and can be a safe bet for them to give a mortgage too.
- Rent To Own Contracts Are More Forgiving Than Mortgages – As this type of agreement is not an outright sale and nor is it registered with a bank, if you were to fall behind on payments and ultimately lose your RTO contract along with your deposit and rental payments, you can still have another chance at ownership with getting another RTO listing or going to a bank for a mortgage.
You are able to do this because the RTO contract doesn’t affect your credit. For most people that have defaulted or fell behind on a mortgage payment, the bank would usually not loan to this type of client any longer, as their history, which is RECORDED, shows that they are a risky client.
I agree, renting to own can be risky, but it sure beats every other option and is possibly the only option available to the average Bahamian currently.
We are making ownership possible and are proud to be the pioneers of this type of real estate investing.