our everyday life

Rent to Own Vs. Buy

by Shala Munroe

Buying a home is part of the American dream, but many people believe it's not in the cards for them because of their credit scores or lack of a down payment. Entering into a rent-to-own agreement can help bridge the gap between renting and buying, putting you in the house you want before you can afford to buy it.

Credit and Down Payment

Two of the biggest obstacles in home buying are having a low credit score and insufficient deposit money. Renting to own can help you with both these issues. The agreement allows you to rent the home for a certain number of years, during which time you can work on rebuilding your credit and saving up a down payment for your mortgage. Lease-purchase agreements often require you to pay the homeowner a large deposit, part of which is often applied to your down payment at closing.

Upkeep

When you buy your house, you're responsible for all the maintenance and basic upkeep of the house from the easy job of changing the furnace filter to more complicated repairs such as replacing the roof. When you rent to own, however, you aren't technically the owner yet, which means you aren't responsible for maintenance and upkeep. That trouble and expense falls on the owner's shoulders.

Tax Benefits

A major benefit of owning your home is that you get to write off the interest when you file your taxes. You don't get to take advantage of this benefit if you're renting to own, but your tax benefit starts the day you buy the home. After you buy the house, you can also deduct the cost of some improvements. However, if the owner makes the improvements before you buy, he gets the tax benefits.

Monthly Payments

Renting to own means you've got to pay a high enough monthly payment to cover the owner's mortgage payment, plus a little extra so he has wiggle room to make repairs and pay property taxes. This typically means you'll pay higher monthly payments when you rent to own than you will after you buy the home. Some owners allow a portion of your monthly rent payments to go toward lowering the final purchase price, while others owe too much to make this feasible. Keep in mind that all the rent payments will be for naught if you can't close on the house when the rent-to-own agreement specifies; you're also likely to lose your deposit at the end of the rental agreement and be forced to move out.

About the Author

Based outside Atlanta, Ga., Shala Munroe has been writing and copy editing since 1995. Beginning her career at newspapers such as the "Marietta Daily Journal" and the "Atlanta Business Chronicle," she most recently worked in communications and management for several nonprofit organizations before purchasing a flower shop in 2006. She earned a BA in communications from Jacksonville State University.

Photo Credits

  • Hemera Technologies/AbleStock.com/Getty Images