Lease-to-own or also known as, Rent-to-own can be a great alternative if you can't afford to buy a home outright, have a low credit score or don't have enough money for a down payment. Rent-to-own contracts can also give you the chance to see how you like a home and neighborhood without committing to buying it. Read on to better understand what rent-to-own means, how the process works and what you should know if you're interested.
What does rent-to-own mean?
Simply put, rent-to-own is where you rent a home for a certain period of time before you buy it. Depending on the terms of the contract, that period can range from several months to several years. These contracts are different from a traditional renter's lease or purchase contract.
As part of your rent-to-own contract, the seller agrees to put a certain amount of money from your monthly rent payment toward your equity in the home.
There are two kinds of rent-to-own contracts: lease-purchase and lease option. With a lease option contract, you have the option to purchase the home after a time period you and the property owner have agreed upon. With a lease-purchase contract, you're legally obligated to buy the home at the end of that period.
You’ll be required to put down about 5-10% as a commitment fee to go toward the purchase price and be able to finance within the agreed time frame. Credit score and Debt to income ratio are not required to qualify.
The benefits of lease to own:
- You get to take over the house
- Can renovate home to your liking
- No increase rent (unless property tax goes up)
- All terms are upfront and transparent
- There is already a set price to purchase in the future
- Live with reassurance that your landlord will not kick you out for no reason
- Monthly credit back
- No limit to how many people live in the house
Lease to own is a great opportunity for those who can’t get financing from the bank to buy a house yet and those who want a nice house but don’t want to pay the high interest rate now and need to buy some time until the rate is lower in the future.
Why rent to own?
- Flexible Homeownership: Enjoy the flexibility of living in your chosen home while gradually transitioning to full homeownership.
- Credit Improvement: The rent-to-own arrangement provides you the opportunity to improve your credit scores, making homeownership more accessible in the future.
- Lock in Purchase Price: Secure the current home's purchase price, protecting yourself from potential market fluctuations.
- Test Drive the Home: Experience life in the home before committing to the purchase, ensuring it truly meets your needs and preferences.
- Personalization: Customize and personalize the property during the rental period, making it feel truly like home.
- Responsibility and Pride: Encourage a sense of responsibility and pride in the property, fostering a strong connection to the community.
If this sounds like a perfect fit for you, or if you would like to know if this is the right option for you, book a free consultation with us to further discuss.