Have you heard of rent-to-own homes? Many people think the idea sounds attractive. If you want to start building equity early, you might be one of them.
Rent-to-own homes are somewhat risky. They’re not our favorite option, but we understand that they present a path to homeownership for some.
We want you to have all the necessary facts about rent-to-own homes. Listen up as we tell you what they are, why you might want one and why you wouldn’t.
What Is a Rent-To-Own Home?
If you select a rent-to-own home, you’ll lease it for a specified period before you purchase it. Some (not all) of your rent money might go toward your purchase.
Rent-to-own contracts vary widely. For example, you may or may not be able to back out of your purchase at the end of your lease. You might also be responsible for property maintenance. Before committing to a rent-to-own contract, enlist a real estate lawyer’s help to ensure that you understand everything.
Rent-to-own homes offer a few positives that you need to understand to fuel your decision-making process. Here are the top three:
- Since you’ve already committed to buying the home at the end of your lease term, you’ll avoid unsettling competition.
- There isn’t a standard rent-to-own contract available, so all terms are negotiable.
- The rent-to-own arrangement usually forces buyers to save for a partial down payment.
Rent-to-own contracts come with plenty of cons, although the sellers would never tell you that! Here are three major ones:
- Your rent will probably be more expensive than traditional rentals, especially if a portion will go toward your home purchase.
- If your purchase price is stated in the contract, you might end up paying more than the home is worth if its value decreases.
- If you decide not to purchase the home (and your contract allows this), you’ll lose all of the money intended to go toward your purchase.
Contact Us Today!
If you’re considering a rent-to-own contract, we can help! Contact MortgageDepot today to decide if a rent-to-own home is your best option.
Connect with one of our loan consultants today to learn more!