Rent to Own Pros & Cons

Rent to Own Pros & Cons

The rent-to-own transaction was developed in the 1960s to help customers obtain electronics, furniture and other household items without falling into debt or jeopardizing credit. Rent to own works through the renting out of products for specified rental periods. Once a consumer has rented (and made rental payments on) an item for a contractually specified length of time, he owns the item. Rent to own is also available for homes and is often referred to as a lease purchase or lease option agreement. With rent-to-own homes, tenants usually apply a portion of their monthly rent toward the eventual purchase of their apartment or house from the landlord.

Eligibility: One of the main advantages of rent-to-own transactions is that all consumers, regardless of credit standings and financial history, can benefit from them. Even if individuals have histories of foreclosure, bankruptcy and poor (or incredibly poor) credit, they can still rent to own products from retailers. When it comes to rent-to-own homes, there are no eligibility restrictions. Only the landlord or seller has the power to approve a potential tenant/buyer, eliminating the need for mortgage approvals.

Flexibility: When it comes to retail, rent-to-own agreements are specific to each rental period. Customers can change payment terms and conditions and can also stop payments and return products whenever they wish, for whatever reason. Rent-to-own homes, however, is not nearly as flexible. Once a contract has been finalized, tenants who violate it can be very quickly evicted (sometimes violations can be as little as one late payment). Any down payments or monthly premiums that were paid by the tenant are non-refundable in this instance.

Product Affordability: Renting to own allows consumers to make payments on products interest-rate free. Consumers who choose the option of making a few large payments on an item often end up paying a price close to retail value. However, consumers who make many small payments over a longer period of time often end up paying more than retail value.

Home Affordability: Renting to own a home is not necessarily cheaper in the end than standard purchasing, though it can be beneficial for individuals with poor financial backgrounds. However, while no mortgage approval is required to rent to own a house, according to iRentToOwn.com, tenants realistically thinking of owning should be able to qualify for a mortgage. Ideally, tenants will only have to make an initial down payment and pay one month of rent because they can then refinance the home and use its equity to cover costs.

Ownership: According to the Association of Progressive Rental Organizations, about 75 percent of customers renting to own return items within the first four months of renting. If the product is returned during a payment period, customers can reinstate their payment histories within a time specified by state law. One problem with rent-to-own homes is that landlords (who never intend to sell) sometimes scheme potential buyers out of down payments and rent.

__________________________________

Colorado Springs real estate has some of the best homes for sale. Hundreds of people come looking for homes for sale in Colorado Springs. If you too are looking for your dream home here, you may hire the services of a reputed Colorado Springs REALTOR who will help you find what you are looking for. And if you have any questions about Colorado Springs commercial real estate you may please contact Mike Stuard.