What Is a Rent-to-Own Home?
A rent-to-own home is a house you can buy through a rent-to-own agreement. With this type of home purchase contract, the buyer agrees to rent a property for a specific time period before taking ownership. The time period can range from several months to several years, depending on the specifics of the contract.
Like any other home, companies or individual sellers can own rent to own homes, but they work much differently than the normal sales process. As part of the sales contract, the seller agrees to hold a certain portion of each month’s rent payment to go toward the buyer’s purchase price in the home when they purchase it. And what if the buyer doesn’t end up buying the house? Well, you usually lose that equity.
Pros for Buyers
Some of the benefits for buyers in this type of situation is instead of having to pay a significant down payment when you move in, you build equity over a specific period of time by paying higher rent. It also gives you time to see where the marketing is going and you do not have to qualify for a mortgage right away so you have time to fix your credit if it is less than perfect.
It not perfect for everyone but it can have some advantages depending on your situation.