What is rent with option to buy and is it for you?
Rent with option to buy lets you live in a home as a tenant and buy it later, within a set period and at a price agreed from the start. Part of what you pay is deducted from the final price.
It suits you if you do not yet have the full deposit for a mortgage, want to try the home and the area before buying, or need to sell another property first.
It is not simply renting. On signing, the buyer pays an option fee, usually at least 10% of the price, which is lost if they do not buy in the end. That way both sides commit: the owner reserves the home and the tenant secures the price. An agreement with no option fee, where everything paid is deducted later, would bring no benefit to the seller.
Homes with an option to buy are few and are reserved quickly. Tell us what you are looking for and where, and we will let you know as soon as one comes up. If you are an owner interested in offering your home this way, we can advise you too.
Advantages for the buyer
| Advantages for the owner
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How it works and how we help
1. Option fee: on signing you pay an amount, usually at least 10% of the price, for the right to buy. It is deducted from the price if you buy and lost if you do not exercise the option.
2. Monthly rent: all or part of it is deducted from the final price, as agreed.
3. Term: the period to decide whether to buy and the purchase price are fixed.
4. Purchase: if you decide to buy within the term, the deeds are signed at the notary and you pay the balance, with a mortgage if you need one.
What both sides should bear in mind. The buyer loses the option fee and the part of the rent paid towards the price if they do not buy, usually pays a higher rent than a normal rental and covers the running costs while living there. The owner cannot sell to anyone else during the term, the price stays fixed even if the market rises, and the option fee and rent must be declared for tax.
Private contract or before a notary: both are legal. With a private contract the option is not registered: the owner could sell the home to someone else without mentioning it, because it is not recorded anywhere. Before a notary, the option can be recorded at the Land Registry and is protected, but more tax is paid: first on the option fee and then on the full price in the purchase deeds.
How we help: we have been preparing and negotiating rent-with-option-to-buy agreements on the Costa Blanca for years, and our founder, Daniel J. Eccles, has more than 20 years in the local property market. It is a simple arrangement, but it takes more negotiation than a normal sale, because buyer and seller have to agree on much more than the price. We find the right home or the right buyer, negotiate an agreement that works for both sides, prepare the contract with an independent lawyer and stay with you until the deeds are signed.
Is all the rent deducted from the price? It depends on the contract: it may be all or only part, and it must be in writing.
What taxes are paid? On purchase, the same as any sale: transfer tax (ITP) on resale homes, or VAT and stamp duty (AJD) on new builds. If the option is signed before a notary, the option fee is also taxed when it is signed. Confirm your case with an adviser.
Looking for a standard rental? See our long-term rentals. Are you an owner? Value your home.
