We hear the term “rent-to-own” often, but do you really understand what it involves and how it could work for you in purchasing a home? Rent-to-own, also known as a lease option, is a contract that allows renters to lease a property and, at the end of the lease (usually one to three years), have the option to purchase the home at a predetermined price.
Many times, a portion of the rent that they had paid will be put toward their down payment. There are some regulations in place to protect the tenant if they so choose such as putting down a non-refundable deposit at the beginning of the agreement that will go toward their down payment if they opt to purchase. It also means the owner can’t sell the home to anyone else during this time.
Rent-to-Own plans like these work well for future home buyers who are working on their credit or are potential home buyers who dream of ownership, but are also concerned they haven’t saved up enough cash for a down payment. This can also include those who have gone through foreclosures or those that don’t qualify for a mortgage.
Some benefits of Rent to Own Agreements:
It provides a route to home ownership
It is a great way to put roots down in a preferred neighborhood with a good school district.
You don’t have to immediately commit to a thirty year mortgage, you can rent, and still earn at least a small bit of equity.
You are able to lock in a price on the home at the beginning of the agreement.
All in all, Rent-to-Own is a complex arrangement, but can be manageable under the right circumstances.
If you choose to pursue a Rent to Own agreement, it’s important to hire an expert to help you navigate the process and protect your interests.
Someone seasoned in rent-to-own contracts can ensure you’ve specified everything in writing so that you understand the contract and, ultimately, complete a successful transaction.
If this is something you’d like to consider, give The Credit Repairmen a call so we can help guide you through the process and ensure that you will be prepared.