When you’re shopping for something like a sweater, you get to try it on and decide if you like it before actually buying. And if you get it home and realize there’s a problem, you can normally take it back to the store. So why aren’t there similar options to “try on” major purchases, like a house, before buying? When you think about it, buying a house having only seen it a few times seems pretty risky. That’s why there actually is one such option. It’s called renting to own.
The rent to own process looks something like this: You sign a multi-year lease agreement with the option of purchasing the property after a set amount of time (generally between two and five years). You pay a monthly rent, part of which goes toward an eventual purchase, and you may also make a one-time payment called “option money.” At the end of the lease term, you have the option to either purchase the home or walk away entirely.
Pros of Rent to Own Homes:
Why would you be interested in renting to own? Here’s a short list of the pros:
- Renting to own allows you to buy a house you’re already familiar with and know you like.
- This route allows you time to get your finances in order, save up a down payment, and build your credit score — a major boon for people who wouldn’t be able to qualify for a traditional mortgage right away.
- You can “lock in” a house that you really love but wouldn’t be able to afford right now.
Cons of Rent to Own Homes:
Of course, nothing is without its downsides. Here are the cons to consider:
- Not all homeowners are willing to work with rent to own houses, so you’ll have fewer options.
- You’ll pay more per month than you would by simply renting.
- If you decide not to purchase the home at the end of the lease, you’ll generally forfeit your option money.
Does renting to own sound like something that would work for you? Join the discussion in the comments.