Rent to own can be an appealing concept for people who are interested in owning a home but have thus far been shut out of the traditional home buying process. Increases in home prices coupled with high-interest rates have left home affordability at its lowest point in thirty years.
Rent to own is a concept whereby a potential homebuyer enters into a lease purchase agreement that allows them to rent a home for a specific period of time prior to buying the property later.
Reasons to Rent to Own
Reasons a homebuyer would choose the rent to own process include to save for a down payment, or to receive the proceeds of a home sale for use as a down payment, or to correct credit issues that keep them from being able to qualify for financing. It also allows them to experience a neighborhood prior to making a permanent investment. A typical option period for a rent to own property is usually one to two years, but may be as long as five years.
In addition to standard lease or purchase contract terms, the below items must be considered in the rent to own agreement:
- Is there an upfront option payment to be paid upon signing of the agreement, and how much is that payment?
- What part of that option payment will be applied to the purchase price of the property?
- What portion of the rent, if any, is to be applied to the purchase price?
- Who is responsible for maintenance of the property during the lease term?
- Who is responsible for repairs during the lease term?