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2 Bumps

How does renting to own work, and what do I need to know?

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purplerobin

Asked by purplerobin at 3:13 AM on Apr. 4, 2013 in Home & Garden

Level 19 (6,468 Credits)
Answers (6)
  • Renting to own usually doesn't require a significant amount of money down, but by the time you make all of the payments so that you own whatever it is you've been renting, you will have paid one and a half times, or even double, the value. The advantages are that you can stop paying and return the property at any time, usually wthout damaging your credit, and you can often buy insurance against breakage or theft. Renting to own is available to those with shaky credit, but if you can do it, you're usually better off paying with a credit card so that you get the warranty privileges without the horrendous interest charges.
    Ballad

    Answer by Ballad at 3:31 AM on Apr. 4, 2013

  • Renting to own what a house, furniture etc? If a house then PM me and I will discuss in detail. I am a landlord and we have done it several times so I will give you the other side of it and what to ask for from your landlord.
    aeneva

    Answer by aeneva at 8:17 AM on Apr. 4, 2013

  • I'm not sure either. What happens if the home you've been paying on is destroyed? Wouldn't the actual owner get the insurance money, not you? I guess that scenario wouldn't be any different than renting and just being out that money. I'd throroughly research this before going thru with it. If you will be paying more than you would if you rented, what if you end up having to move like because of a career change? I'd have all kinds of questions.
    HHx5

    Answer by HHx5 at 8:44 AM on Apr. 4, 2013

  • LAWYER.
    So many people get screwed in these types of situations.
    PartyGalAnne

    Answer by PartyGalAnne at 1:51 PM on Apr. 4, 2013

  • I agree with PartyGalAnne - except maybe for the lawyer part, cause $$$.

    I did have a friend, though, who was paying I think $1600/month for a rent-to-own 3-bedroom house. I would ask for proof that the money is going towards a downpayment (though I'm not sure what type of proof there would be). When my friend was doing that, he found out after a year or so that they money wasn't going towards a down payment at all, so he was really just losing that much every month!
    AdensMama0308

    Answer by AdensMama0308 at 8:05 PM on Apr. 17, 2013

  • Usually with rent-to-own, you'll pay an option fee, and the rent would be higher than normal with the amount over going towards the down payment. At the end of the option period, if you decide to buy, your option fee + the amount of rent you paid would be considered your down payment. Then you would get a loan from a bank to finance the rest for, usually a 30-year mortgage.

    Example: House is being sold for $100,000.00. You give a $5,000.00 option fee. You agree to rent for 12 months. Normal rent would be $500.00 per month. Your rent to own rent is $800.00 per month. $300.00 of that $800.00, is credited to you as going towards the down payment. At the end of 1-year, you've put $3,600.00 (extra rent) + 5,000.00 (option fee) = $8,600.00, to be your down payment for the house. You'd need to get a bank loan for $91,400.00 to finance the rest over 30-years. You'd also money for need closing costs. Hope this helps.
    DivaNCali

    Answer by DivaNCali at 8:47 PM on May. 23, 2013

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