RENT TO OWN: Another path to owning a home.

Owning your house in a country like Nigeria, especially in metro cities of Lagos, Abuja and Port Harcourt is a laudable accomplishment considering the high cost of living. In this article, we take a look at an alternative to paying rent and being treated shabbily by your landlord.

The cost of renting a standard house is so back-breaking, sometimes having enough to build your own house doesn’t even come into the picture especially with the poor mortgage system in the country.

To curtail Nigeria’s housing deficit and encourage more people to own their houses, the past administration came up with a system through the Mortgage Refinance Company (MRC) at the Federal level and the Lagos State Home Ownership Mortgage Scheme (Lagos H.O.M.S) at the State level called the “Rent to Own” initiative.

A rent-to-own is the process where a tenant becomes the owner of a property by paying a specific amount monthly over a period of time.

Depending on the agreement between the landlord and the tenant, there can either be an initial down payment for the property with specific monthly payments to offset the balance over a stipulated time or the tenant (who is the prospective buyer) makes monthly rent payments till the asking price is paid.

These monthly rental payments are usually higher than the normal market rental price because a portion of it is going into the purchase of the property at the agreed date.

Under the Lagos H.O.M.S Rent-to-Own initiative, the stipulated period for payment is 10 – 20 years after an initial down payment of not more than 30 per cent of the value of the house has been made. During this period, a portion of the beneficiaries’ rent would have been saved by the scheme.

Beneficiaries are also expected to have regular monthly income and/or profit. This determines or informs the decision of the board on the type of housing units that will be allocated to participants. The scheme also accommodates people in the informal sector such as transport operators, traders, fashion designers etc. as long as they meet the stated criteria thus giving everyone an equal footing.

Although the Rent-to-Own initiative can be said to be a type of mortgage since it helps you achieve what a standard mortgage system would – make you a homeowner, it is slightly different.

In a mortgage, you borrow money from the mortgage bank to buy your house outright. The title and deed of the house belongs to you but you are expected to pay a specific amount to the bank every month. Failure to do so depending on the agreement will lead to a foreclosure of your property.

In a Rent-to-own scheme however, you do not have to pay for the property at once. The payment is spread over a period of time before the property becomes yours.

The “Rent-to-Own” Initiative aims to help people become mortgage holders and eventually homeowners by saving a percentage of the rent paid as equity to pay for mortgage. Considering the rate a standard apartment goes for, it is obvious people have the capacity to build their houses if the conditions are right.

It is on this premise that the government has decided to start this initiative so as to curb the many implications of substandard housing and shortage.

A commendable move in the right direction, the question remains whether the scheme will have the devastating promised effect.