Sep 10, 2012
A lot of folks like to think of renting to own like a layaway program. Only renting to own is even better. You get full use of the house while the 'layaway program' is still in place. Once you've paid for it, it is yours.
However, unlike layaway programs, rent-to-own has a few more costs. Unlike a sweater or a sofa, a home has costs to the owner beyond the purchase price - like taxes, insurance, mortgage interest, upkeep and repairs.
So the cost of rent needs to equal not only the price of the property, but these extra costs. And owners often need to add on about 10% to cover the hassle of managing the property.
All those costs added up will usually exceed the cost of the monthly mortgage payment if you were to outright purchase the property. So why would you rent to own instead of just buy now? Two words: down payment. You may not have it.
The solution? Get with a good mortgage lender and figure it out. A good mortgage officer can help determine if buying is a good option (and I'm not talking about some bait-and-switch on-line broker). A smaller down payment will usually mean a higher interest rate. You're usually better off paying a higher rate ( and lets face it, the rates are still incredibly good) and getting a mortgage instead of renting.
So if you're thinking of renting to own, get out the calculator and run the numbers with the seller or your agent. It may work. Or you may decide to purchase with a mortgage. Or you may decide to keep renting. [where: 75230]