Rent-to-own homes or rent-to-own apartments can be a convenient way to invest your rent money into a property and finally become a homeowner. Plus, you’ll avoid paying any property taxes or homeowner’s insurance. When renting a house or apartment, it can feel like you’re just giving away your money to the landlord each month.
Yes, you are getting something important in return — a roof over your head and a space where you can (hopefully) feel comfortable and safe. But you are essentially paying your landlord’s mortgage. And when you leave the property, you will get nothing in return. That’s because when you rent, you’re not building any equity.
When you buy a home, on the other hand, part of your mortgage goes toward your loan’s interest rate, but a big chunk of it goes toward the actual cost of the house when you bought it. This means that, on average, you would break even on your investment in just 5 to 7 years.
Unfortunately, many renters are not able to afford the down payment on a home. Most conventional mortgages require a down payment of at least 20%. FHA loans may allow for a down payment as low as 3.5%, but this can still be a pretty costly figure.
On a $250,000 home, buyers who need to make a 3.5% down payment would need to come up with almost $9,000 as a down payment. For many, this is not a feasible option.
Others may be struggling with a low credit score and worry they won’t be able to get good terms on a mortgage loan.
What if there was a way to keep paying rent but actually have something to show for it when you’re done?
That’s where renting to own comes in.
When you rent to own a property, you are still paying rent, but part of that rent is going toward buying the home. In a way, it is like your landlord is financing your purchase by agreeing to take the payment over a long period of time.
Unlike other properties in the real estate market, rent-to-own homes tend to have a set purchase price. This means the price will not change from what you and the landlord agree upon in a written contract. Plus, you can settle with the seller to get the best terms.
There are also several lease-to-own realtors you can contact to discover the best place for you.