WHAT IS RENT TO OWN?
Rent to own is an option for homebuyers who aren’t in a position to buy now, but will most likely be in the future. A portion of the monthly rent payment will go towards the purchase of the home which will usually reduce what is needed to buy the home when all is said and done.
Here are some of the pros and cons of rent to own:
PROS
IMPROVE CREDIT
If your credit isn’t quite where you need it, rent to own give you time to improve it. The better your credit score, the more likely you are to receive a loan when it comes time to apply. For information on how to improve your credit score, click HERE.
LOCKED-IN PRICE
With rent to own, you don’t have to worry about the price of a home increasing while you are living there because there will already be in agreement in place. If the value of the home falls, a renter can choose not to buy.
TRY IT OUT
Rent to own gives you the chance to learn more about the house and the neighborhood before you commit to buying. If you change your mind about the location, and don’t mind giving up the extra money you’ve spent, you can walk away from the house once your rental term is over.
CONS
LESS CONTROL
Until you buy the home, you don’t have as much control over what happens. This could mean that major decisions about the house won’t be made by you. Even though you aren’t buying at this time, it’s still a good idea to have an inspection of the home so you know what you’re getting into.
COULD LOSE MONEY
If you decide not to buy the home, you’ll be out the extra money you put towards your rent. If you aren't 100% sure about the area to which you are moving or how your budget would be impacted, try a test run. (Ex. rent in the area you're interested in or set aside the money that would be used to pay you rent each month.)
