In one of my Facebook groups the topic of Rent-To-Own always comes up. The mom always asks what is your opinion on going that route to buy a home and I always comment “NO”!!! Although Rent-To-Own sounds good in theory and some landlords have good intentions, there are better ways that are much less risky.
So before I get into my reasons as to why you should not do this, lets break down the process of Rent-To Own. Basically you are paying an agreed upon premium in your rent with obligation of purchasing the home at the end of your lease. The premium that you are paying is suppose to be put in some type of savings account by your landlord so the funds can go to your down payment. This process is also known as a lease-option or a lease-purchase. Seems pretty straight forward right? Well here are some things to keep in mind:
- The bottom line is you do not own this property while you are in the leasing stage. Anything could happen and you are in jeopardy of losing the house and the money you have put into it.
- Just like any normal rental agreement, you are limited to what changes you can make to the property because again it is not yours.
- Once the leasing period has ended, that does not mean you can still buy the house. You are still required to get the necessary funding to secure the mortgage needed to make the purchase. You can still be denied from getting a mortgage if your credit is not where it needs to be. You take the chance of losing that extra money you have been paying if you can’t buy the house.
- Just like any rental agreement, you are treated as a tenant so if you miss rental payments you can also lose the premium money you have been putting towards the house and be evicted.
- If you are in a situation where you think you need to Rent- To -Own, you shouldn’t be buying a home anyway because you have no money.
My advice is to hold off until you are ready to make that purchase by taking out a mortgage or in straight cash. Do the needful to fix your credit and save for your deposit. There are so many programs out there to assist first time home buyers if you do your research.