Why Rent To Own?
What Is “Rent To Own”?
Before I tell you why you may want to choose to rent to own your home, let me tell you exactly what it means to “rent to own.” To rent-to-own, also known as a lease purchase or lease-to-own, basically means you are renting with the option to buy at anytime. Some rent to own agreements include a portion of the rent to be applied towards principal. Many also require a down payment which is also applied towards principal, for instance;
If you buy a $112,000 home on a rent to own contract, and you paid $8,500 down payment, then you could purchase the home at anytime for $103,500 minus credit accrued from monthly payments (if applicable).
If you become a tenant buyer (someone in a rent to own contract) you take immediate ownership of the home. You are no longer considered a renter, you have the freedom to do what you want to the house, as if it is yours. Instead of landlords, the company you buy from is now more like a bank. This freedom is a perk for the tenant buyer, but can be risky for the owners, because the tenant does not “have” to buy. This is why most require a down payment.
Who Should Rent To Own?
If you are a responsible person dreaming of owning your own home, and for whatever reason cannot qualify for a bank loan, a good rent to own program might be just for you. If your credit history is keeping you from buying a house today, you can still buy a house. Unlike renting, where all of your rent is going to the landlords pocket, if you rent to own part of your monthly payment is going towards principal, which builds your equity in the home, not your landlords! When you go to get financing, you are now applying for Re-financing instead of a Mortgage, with equity and proof of payments.
Benefits of Owning
Stops rental rules and restrictions; do what you want, when you want, how you want!
Ends rental rate increases
Gains dollar saving tax credits
Build (repair) your credit