A traditional mortgage isn’t always an option for everyone. If you need time to build up your credit score, have more time to save for a down payment, or you know exactly where you want to live, a rent-to-own home may be an option for you. But what are they and how do they work?
A rent-to-own home, also known as a lease-to-own home, is a house that you rent for a specific amount of time that comes with the option to purchase before your lease expires. But depending on the type of agreement you have, you may or may not be required to purchase the home. That is why it is important to know which type of rent-to-own agreement you’re committing to and why we created this post.
Below you’ll learn about rent-to-own homes from how the agreements work, to the advantage of taking this step as an investment or ownership strategy, and some helpful hints so that you can decide if a lease-to-own agreement is right for you.
A rent-to-own home works by following this process:
The main difference between a lease-option and a lease-purchase contract is that a lease-option contract gives you the right to buy the home when your lease expires. A lease-purchase contract requires you to buy the home.
Yes, there are fees associated with this type of home purchase. While there is no standard rate, the fee is often between 1% and 5% of the purchase price of the house and is nonrefundable.
The advantages of investing in a rent-to-own home include:
Yes, there are risks with buying a rent-to-own home including:
And now you know what a rent-to-own property contract is, how it works, and how to make a decision if a lease-to-own home is right for you.
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