If you are a renter who is tired of paying someone else's mortgage and want to own your own home, there are many ways to buy a real estate; one of them is Rent to own (RTO) option, a means of acquiring ownership over time without taking on debt. The renter agrees to lease the home for a predetermined time, usually from one to three years. There may be an up-front consideration fee. The seller allows the buyer to lock in a monthly price for the property until it is paid off. This is a way to settle on something that is right for you even if you are not in the position to make an immediate purchase. A lease purchase can make your rent money work for you instead of making your landlord rich.
This type of agreement works well with those who are new to the housing market or have made a job transition. It also is positive for anyone who needs to strengthen his/her credit or pay off an obligation to qualify for a home purchase. Another advantage to a rent to buy situation is that if you compare how much rent money is applied monthly to the home price, even if it is only 25-50%, it will still be much more money paid on the principal of the house than if you had taken out a loan for it. If you look at how much money goes to the principal payment of a home with a typical mortgage loan, you will find that most of your mortgage payment in the beginning is just paying interest on the loan. The best part about this is that with a rent to own home, you get to live in the home you want to buy while you work on fixing your credit up.
This creative process of how to buy a rent to own house is becoming more and more popular because it creates a "Win - Win" scenario. The Buyer is able to get into a home with limited money and credit, and the Seller is able to get a fair price for their home and get it sold more quickly.
Dana Kern is the Principal Broker at Lokahi Properties