Affordable Rent to Own House in Baguio

What You Need to Know About Renting-to-Own a Room in Baguio City

The Philippine residential market has been experiencing a steady boom in the past years. But despite the growing number of residential properties available in the market, owning a home remains a challenge for buyers and property seekers. There are a number of factors to consider, such as the type of property and the location. But in most cases, the greatest challenge lies in financing the property, especially for those who don't have enough savings or high household income. Aside from the complicated process of obtaining a housing loan or in-house financing, coming up with a large sum of money for a deposit could be quite discouraging for some, thereby postponing their dream home.

Fortunately, there's an easier way to finance your dream home: through rent-to-own arrangements.

What is rent-to-own?

Rent-to-own may be a new and unfamiliar arrangement to some Filipino home buyers. But the concept is fairly straightforward. As its name suggests, rent-to-own is a financing scheme that allows buyers to rent a property for a certain period of time with the intention of buying the property before the lease expires. It's a good alternative to buying the house with spot cash or doing in-house financing because it allows the home buyer to move into the house as soon as possible without having to pay the full sales price up front. It also gives home buyers ample time to work on improving their credit scores or saving the down payment before getting a housing loan.

Typically, there are two types of rent-to-own contract: lease option and lease purchase. A lease option is a type of contract that gives the buyer the right to buy the property when the lease expires. This means that the lessee has the option not to buy the house at the end of the contract. Lease purchase, on the other hand, puts the buyer in a legal obligation to purchase the house within or at the end of the contract period.

Rent-to-own Houses in the Philippines

Rent-to-own is fast becoming a popular trend among homebuyers and sellers in the Philippines. According to data released by the National Convention on Statistics in 2010, only 26.96 percent of Filipino families have plans of acquiring a real estate property, while 73.04 percent don't. The main reason for not having such plans is because most of them are home or landowners already. However, the second main reason for not buying a house is due to their inability to afford a property or make a down payment. According to the data, 17.69 percent has no regular employment, while 16.18 percent has regular employment but don't have enough money to afford a property.

Now that rent-to-own arrangements are available, more Filipino families are encouraged to acquire a house of their own.

But how does rent-to-own works in the Philippines? Here are three possible rent-to-own scenarios.

10-10-80 Payment scheme

In this scheme, the buyer makes a 10 percent down payment before they can move into their new home. Then they pay another 10 percent down payment over a 24-month period. After two years, the buyer will then need to pay the remaining 80 percent. They can either pay in cash or secure a housing loan to accomplish this.

Reservation scheme

In this scheme, the buyer will need to pay a reservation fee and submit documents that will prove their capacity to pay for the property. Once approved, they can then pay 2 months' deposit and monthly rental before they could move in. When the buyer is able to pay 20 percent of the property's value, they can start buying the house through different financing options.

Rent-with-an-option-to-buy scheme

This is the most common rent-to-own scheme in the Philippines. In this scheme, the buyer and the seller will have to draft a contract that specifies the agreed monthly rental, purchase date, sales price, and other clauses including the interest rate. When the lease expires, the buyer should purchase the property. Sometimes, the seller would charge the buyer an option fee for the option to terminate the contract if they decide not to purchase the house.

The rent-to-own scheme is a great financing alternative for those who want to have their own home immediately but don't have enough savings to pay the upfront fees or those who can't obtain a housing loan that has reasonable interest rates. But just like any financing schemes, rent-to-own also carries its risks. Before agreeing to any contract, buyers should first consider the cons of a rent-to-own arrangement.

Cons of rent-to-own

• Rent-to-own has higher monthly rental rates than the average market rate. This is because the monthly rent includes the down payment for the property in case the lessee decides to buy the property.
• If the buyer decides not to purchase the house, the down payment that was paid will be forfeited, which means the buyer will not be able to get the down payment back.
• Rent-to-own has stricter payment policies to avoid nullifying or terminating the contract.
• The buyer has a limited time frame to save and pay for the entire selling price, depending on the contract.
• In worse cases, some owners will try to trick the buyer into terminating the contract. That is why buyers should take the time to know the seller and understand the contract very well before signing a legal agreement.

But the rent-to-own arrangement gives multiple advantages to the buyer. Here are the reasons why rent-to-own may be the answer to finally getting your dream home.

Benefits of rent-to-own

• Once the contract is drafted and signed, the seller could no longer increase the sales price. This means that regardless of appreciation in the property's value in the coming years, the buyer will only pay the locked in sale price stipulated in the contract. This is more advantageous than saving money and buying the house in a future time, where the property has become much more expensive.
• Rent-to-own gives buyers enough time to build up good credit scores if they decide to apply for a housing loan.
• Rent-to-own allows home buyers ample time to save for the full sales price than buying with spot cash.
• Buyers can "test-drive" the property that they want to buy. If they're hesitant in purchasing the property, they can opt to pay an option fee that will allow them to terminate the contract.
• Rent-to-own will allow the buyers to own the house they're renting and turn the rental property into a personal asset. This is much more profitable than merely renting, where they invest in a property that won't be theirs in the future.
• Unlike buying a home with spot cash, rent-to-own allows the buyers to move directly into the property even without having to pay the full sales price up front. This is ideal for families who are looking for immediate residence but don't have enough savings to buy a house.

When planning to enter a rent-to-own arrangement, buyers should always be prepared and should understand if this arrangement best suits their financial goals. Here are some tips that buyers should consider:

Understand the contract thoroughly. Buyers may seek the professional help of a real estate lawyer to check for any binding agreements that may be disadvantageous to both the buyer and the seller. As a buyer, make sure you understand the deadlines, the purchase price, interest, rental fees, and payments, whether the owner allows pets, and who is responsible for property repair and maintenance, property taxes, etc. Buyers should also understand the terms and conditions for contract termination.

Research the property. This is a potential permanent residence. It is a standard protocol to check the home's location and neighborhood, as these are factors that could greatly affect the family's quality of life. Buyers may seek the professional help of a real estate agent to see all possible options available in their desired area.

Research the seller. As mentioned, some sellers may trick the buyer into voiding the contract, thereby forfeiting the property and the down payment that they may have already paid. That is why buyers should take the time to know the seller carefully.

For property seekers in Baguio City, rent-to-own condo units are available. For as low as Php 9,000 per square foot, home buyers can rent-to-own a 1-bedroom fully furnished condo unit with a bathroom and kitchen in a secure condominium development. For growing families, buyers can rent-to-own a brand new 2-bedroom condo unit for as low as Php 6,168 per square foot.

You may visit Lamudi's website to check rent-to-own properties in Baguio City that will match your interests and financial conditions.