Rent-to-Own Housing in the Philippines: What to Expect

a silver key with blue house keychainFilipinos with good credit who can afford to put down enough money to buy a property gravitate toward affordable houses, like from Lancaster New City. After all, this master-planned township in Cavite has convenient and exciting features, from an IT hub to a commercial district. Being a buyer now comes with many incentives.

But those who have no means of paying a relatively substantial down payment or are unable to borrow enough money from a lending institution seek rent-to-own schemes. In this arrangement, the owner of the property leases the unit to someone who intends to buy it over a specified period. The lessee has to pay rent plus a rent-to-own premium, which will make up the eventual down payment once the purchase date comes.

It’s advantageous for both parties, but the risk may weight heavier on the buyer. Here’s why:

Getting No Refund If You Walk Away

If you change your mind along the way, for whatever reason, the contract will most likely say that your paid rent-to-own premiums will be subject to forfeiture. In the end, you’ll lose what is supposedly your down payment for your property purchase.

Paying More If Property Depreciates

When the property depreciates while you rent it, you’ll end up paying for it above market value. While the chances of house appreciation in Cavite is high, it doesn’t guarantee anything.

Facing Eviction If You Pay Late

Delinquency can be a reason for eviction, which can forfeit your rent-to-own premiums by default. Unless you’re confident that your income stays the same throughout the rental period, missed payments can mean put your home ownership goal at risk.

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Losing Everything If the Lessor Defaults on Mortgage

The worst part about the rent-to-own arrangement is the possibility that the current owner of the property stops paying the existing loan. If the house you’re eyeing isn’t fully paid, you can’t prevent the party that financed its initial purchase from foreclosing it in case of default.

A rent-to-own arrangement may sound like a good idea, especially when you don’t have sufficient funds for a down payment on a home. But reconsider your options first before choosing this option to home ownership. You may get a better deal when you take time to build your credit rating and save enough money to buy property.