The rent-to-own industry can be confusing to newcomers looking at this non-traditional path to home-ownership. There are many terms you will run into, such as “rent-to-own” and “lease-to-own” and confusion may arise at the difference between the two.
In short, both terms describe the same contract-type. In a “rent-to-own” or “lease-to-own” contract you and the owner of the home have agreed on a long-term plan for homeownership. This longer-term plan is usually five years in length; at the end of which you have the option to purchase the home at the previously agreed-upon price, move-on to a new opportunity if you discover the home was not right for you or your family, or renegotiate the contract with the owner.
During the 5 years, you will have the right to live in the home as if you were the owner. Depending on the contract you may be responsible for updates and repairs as needed, as if you were the actual owner of the home. The rent paid during this time will include a fee (or simply a percentage of the rent payment) which will go toward the purchase price of the home. This will add up monthly until the five year mark, where you can use the funds you have set aside through renting to purchase the home.
One of the reasons many people turn to rent-to-own (or lease-to-own) home is due to credit worthiness. Another benefit of the lengthened contract period, is that this will also give you time to repair your credit to a point where you may be able to take-out a loan that covers the remaining portion of the home price. This secures the home at a price you find appealing ahead of time, so as the market fluctuates, your home price is already locked-in.
In the end, while these two terms have the same meaning, you will want to do thorough research in finding the right rent-to-own home opportunity for you, and ensure that you are protecting yourself legally before signing any rent-to-own or lease-to-own contract. Remember that you should always come armed with knowledge, and ready to make this a win-win for both you and the owner of the home.
To find rent-to-own home opportunities near you, browse our large nationwide directory. Signing up for a free trial account will give you access to owner information so you can get started on your path to homeownership.