The Truth About Rent To Own
Most of us have become quite familiar with the term "rent to own" Places such as Prime Time and Rent A Center have built substantial fortunes with rent to own merchandise, allowing people to get things they could not afford to buy outright without having to pass the credit checks for a regular loan. While people with lousy credit may feel they have no other options, it's generally best to stay away from rent-to-own, and that goes for rent-to-own houses as well as regular merchandise.
Even though rent to own may sound good for a short period of time, it proves to be an expensive way to actually buy something. Rent to own merchandise may cost you only a few dollars a week, but the rental agreement is generally for 15-20 months. Although you may be paying just a few dollars a week, the total amount you pay quickly adds up to nearly twice the cost of the item.
Along with paying your regular rent, you'll also have to pay applicable sales tax on each rent payment. Like merchandise, rent to own real estate has its disadvantages. You'll end up paying back far more than you would with a regular mortgage -- and a standard 30-year loan is bad enough, because you often pay as much as twice as much in interest as the principal of the loan.
In most cases, rent to own houses are put up on the market by the owner. This means you'll be dealing with the owner directly, rather than through a real estate agent and a bank's loan officer. It will start out as a traditional lease, then proceed to a rent to own basis if you decide you want to keep the home. At that point you and the owner will work out an arrangement, which will normally cover a number of years. Some owners are very flexible and will work with you just to get the price they want for their home, while others will charge you quite a bit more, in order to make a hefty profit.
If you have bad credit and can't get approved for a mortgage, rent to own may be a way to get a home of your own. Although you will be paying a lot more than you would've with a conventional mortgage, many people feel it is better than an apartment or a pure rental. With rent to own houses you are paying money towards the home, instead of just paying for the privilege of occupying it for each month. However, it can also be argued that it would be better to find some way to cut expenses elsewhere and save enough money to qualify for a regular mortgage, even if it means buying a smaller house.
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