In a rent-to-own agreement, the tenant can purchase the house after a lease period. As a security deposit, you’ll have to pay lease fees upfront. Usually, this lease fee works as a down payment in most cases. It can be low as 1% and can go up to 10%. 

But should you consider the rent-to-own agreement for purchasing a house? 

Should You Consider Rent-to-Own Home: Pros & Cons of a Rent-to-Own Home 

Advantages of Rent-to-Own Homes

·         Rent Money Becomes Your Investment 

When you rent a house, rent money goes to the landowner's pocket. But when you have a rent-to-own agreement, some part of the rent money will be used to purchase the house. So, you won't need to keep a separate savings account for purchasing a house. 

·         Total Control of the House 

Tenants who don't have a rent-to-own agreement cannot make changes to the house without the landowner's permission. Besides, it is not a financially good idea to spend money on home improvements when the house is not yours. But when you have a rent-to-own agreement, you can do modifications in the house as you like. You won't have to wait for the landowner's permission. 

·         Tax Exclusion 

As you still don't own the house, you won't directly have to pay any property taxes. Landowners will be responsible for paying all the property taxes, and meanwhile, you can save that money and spend it later. 

·         It Doesn’t Require a Perfect Credit Score 

If you have a low credit score and want to purchase a house, rent-to-own is the perfect option for you. Because in rent-to-own, a certain portion of your rent will be used towards purchasing the house, which will work as a mortgage. And when the time for final payment comes, the landowner can use the credit that you established and transfer the ownership to you. 

Disadvantages of Rent-to-Own Homes

·         Contract Clauses 

Before signing the rent-to-own agreement, make sure you read all of the clauses in the contract. For example, some agreements add the clause of paying rent on time. And if you fail to pay rent on time, you won't be able to become a homeowner. That's why it's necessary to read the contract agreement thoroughly. 

·         You May End Up Paying More

The real estate market can sometimes be very unpredictable. However, locking in a price can be beneficial for you in a rising real estate market. However, if the house price drops below your contract price, you still have to pay the locked-in price. When this happens, you'll face difficulties while finding suitable loans for purchasing the house.

Conclusion

Before coming to a decision on whether you should choose a rent-to-own house or not, you should think long-term. For example, in the future, you may have to change your job, and for this, you may have to shift elsewhere. And when you do, what will happen to this rent-to-lease agreement? That’s why unless you have a solid base in a city, you should think twice before considering the rent-to-own agreement.