Rent to own is a new way to own a home. This process provides the home buyers the opportunity of home ownership without getting into debt. In today’s cost of living, owning your home has become a big challenge for the salaried class families.  The banks have made it harder for these people by making their home loan approvals very stringent. Rent to buy is just like a normal rental agreement however the rental payment includes an additional amount towards the price of the house.  This is normally 20 to 30 percent of the rental payment. Usually the house rent is higher than the market rates of rental payments. Thus rent to own provides a realistic opportunity for home ownership to the people who otherwise would get stuck with paying rent through long years only dreaming of their own homes.

The rent to own purchase is a lease that includes an option to buy the property within an agreed period, normally 2 to 3 years. The price of the house is also fixed along with the date of purchase. The borrower has to pay an option fee of 1 to 5% of the price which will accrue towards the home purchase price. The borrower pays rent plus an additional amount towards the purchase of the house. When the borrower changes his mind and decides not to buy the house he loses the option fee as well as the additional rent he paid.  The rent to buy agreements can be structured in such a way that both the parties can benefit from it.

Who can use the rent to own option?

• Those who are self employed or just starting a career
• People with no savings and without credit history
• People with bad credit or who have been bankrupt
• People who are sick of paying rent and want to own a house.
• People who keep changing house not able deal with landlords.
• People who want to build a stable financial future.
• New residents of the state

Many of the rent-to-own agreements require a low or no down payment.  The landlord accepts the down payment as well as the mortgage from the and usually collects a higher interest rate from the purchaser to pay his mortgage. He still gains the difference in the monthly payment as well as the difference in the selling price of the property. Under this agreement, the purchaser is able to improve his credit status and become eligible for a regular home mortgage from a bank or lender. This way he is able to free himself from the burden of paying rent and also own the house he is currently renting.  The rent to own process is a short term arrangement till the purchaser becomes eligible for taking a home loan after repairing his credit status. The rent to own scheme helps the purchaser to own a home within a few years. Otherwise he would be paying rent endlessly without having a chance to own a house in the present economic situation.  The rent to own service providers also counsel the people about debt management and building savings. Rent to own without down payment is a concept is helpful if approached with caution and followed with discipline.