Rent-to-Own a Home Purchase Option: Is it Right for Me?

Owning a home is a dream for many. Often when prospective buyers and current renters start considering home ownership, start number crunching and analyzing the ups and downs of this life changing chapter, they ponder the rent-to-own option.

This particular method of home buying can be a wonderful option. Below are some situations where renting to own makes sense.

What is a rent-to-own option?

The rent-to-own option occurs when a seller allows a buyer to rent their home for a specific period of time (generally from 1-5 years) for a set purchase price of the home.

After the rental period, the buyer is then given the opportunity to purchase the home. Initially the buyer will pay a one-time deposit amount sometimes called the “option fee”, then each month they will pay a rental fee. A portion (rental credit) of that rental fee will go towards the purchase of the home.

If at the end of the contracted time, the buyer decides to follow through and buy the home, the deposit and the rental credits will all go directly towards it. However, if the buyer decides not to buy the home, they lose all those funds.

Each rent to own contract may vary on its terms, so it is important to consult a real estate agent or real estate lawyer during the process.

Poor Credit

To quality for a mortgage, buyers must have a credit score in a specific range. Some buyers may have had financial challenges in the past that have resulted in their credit being less than stellar.

In these cases, it can be very difficult to obtain a mortgage. With a rent-to-own situation, it gives buyers an opportunity to purchase a home while helping to repair their credit over time.

Improving credit can take long periods of time from months to even years, so a buyer in this position would do well purchasing a rent to own home.

Lack of Financial Funds

Coming up with the funds for a deposit on a home for a traditional mortgage is not always easy. Rent to own situations allow buyers to build up funds to put towards their home throughout the rental period.

If a buyer is serious about purchasing a home but needs some extra time to save money, a rent to buy option can be beneficial.

The beauty with home purchase option is that a buyer can live in the home they want to purchase right away whether they have the funds or not. The rental period gives them the time to come up with those funds and in the end have a beautiful home to show for it.

After the rental period is over, between the deposit and the rental credits, the buyer will have a significant amount of money to put down on the home purchase.

Testing the Waters

For some, making the leap from renter to homeowner can seem a bit nerve wracking. New financial responsibilities, more home maintenance tasks and other related changes are all things that buyers anticipate.

The rent to own option gives buyers the opportunity to “test the waters” in a way as they are able to act as a homeowner in paying a monthly payment and take part in other homeowner related tasks but also have the ability to forgo the house if it doesn’t suit them once the contract is up.

Granted if they decided not to purchase they home they also lose that rental money. It would be similar to if they had just been renting a home but with the opportunity to purchase afterwards.

Making a commitment to purchase a home is an important step and not everyone is confident in taking that step right away. Rent to own options give buyers a better idea of how it feels to be a homeowner without the initial commitment.

A Seller’s Tactic

As a seller it can be beyond frustrating when you have found and purchased your dream home but cannot get your previous home sold. Trying to tackle two mortgages at once is challenging for even a short period of time, but paying them for months can be a major struggle.

Sellers in this situation just want their house sold quickly and offering the home as a rent to buy option may entice more buyers. A seller would charge a “rent” close to if not a bit more than the normal mortgage payment. At the end of the contracted period, the seller is able to offload their home or is able to keep the buyer’s deposit.

The downside would be if the buyer chose not to purchase the home after the rental period. The seller would then have to put the home back on the market.

More Articles for Home Buyers


More Articles for Home Buyers 
More Articles for Home Sellers

Thanks for reading my blog! It is my goal as your full service real estate Realtor specializing in the Richmond HillSavannahPooler, and Hinesville – Georgia areas, to provide you with exceptional service at all times. My promise to you is to openly and honestly answer all your questions, help you navigate through the process and to make myself available to you day and night. I work for you and you are my priority. My local expertise and extensive real estate training and experience will benefit you whether you are serious about buying or selling a home at this time, or are a returning client checking out the many homeowner resources I offer. I am a “real” person and my reputation depends on every client, every deal, every day. I LOVE my job and it shows! You can also connect with me on my Facebook Page and/or Google Plus for area info and events, things to do, real estate news, home ownership tips, tips for both buyers and sellers, and so much more! I’m also on Pinterest!