Rent to own is a less traveled path to home ownership. The Rent to Own home purchase strategy may be an ideal way for renters to move into a new home before they have saved the required down payment.
In general terms, “Rent to Own” works as follows:
- The Rent to Own Company (Company) and the Home Buyers (Buyer) meet and discuss the terms of: rent, home purchase price/budget, time schedule, down payments required, down payment saving plan and related,
- The Company and the Buyer enter into both a rental agreement and also a home purchase agreement (or an "option to purchase agreement"),
- The Buyer often with the Company’s assistance will select a home for purchase,
- The Company purchases the chosen home and “rents” the home to the Buyer – typically for a period of 2-3 years.
- During the rental period, every month the Buyer pays both rent and an agreed amount that will be credited toward the down payment.
- At the end of the lease, once a sufficient amount has been saved for the down payment, the Renter will arrange a mortgage and purchase the home from the Rent to Own Company. The renter now becomes the home owner and continues to live in the home.
Rent to Own suits people that have had difficulty in saving for a down payment, may have had a past bankruptcy, lost income or savings due to illness, or a variety of other factors.
Read and understand the fine print! Understand the conditions of the lease and purchase agreements that may result in penalties (improper maintenance, missed payments or others).
While Rent to Own is a less common way to purchase a home, it does provide families many of the benefits of home ownership during the rental period while they save for their down payment.
If you would like to learn more, our team of specialists and I would be happy to discuss Rent to Own and other home purchase options to help you determine your best path to home ownership.