Rent to own is an alternative method of attaining home ownership. A home ownership opportunity is given to a renter to purchase the rented property at the end of the lease term. The obvious benefit of rent to own is that you need not worry about heavy upfront deposits and closing costs enabling home buyers to achieve home ownership for much less up front payments.

Rent to own is a good option if you are not yet ready to purchase the house that you most desire. You can exercise this Rent to Buy option if you do not have enough cash at hand and need to improve your credit prior to getting a good mortgage rate.

To exercise the lease option, all you need to do is to zero in on a suitable house that you desire and arrive at a conclusion that you could afford it. Then approach professionals that specialize in rent to own business. They will buy the property for you and offer the lease option. Yet another method is to find out if the house owner will offer a lease option.

Before exercising rent to own option, negotiate the purchase price, the lease term, initial option money and monthly payments. Since the sale price and rent are market determined, the buyers know less about the price compared with the sellers. So it is always advisable to do your homework before deciding on a property.

While buyers generally prefer long lease period, as it provides time to build the equity and repair the credit, it can be a drawback if you cannot exercise the lease option. Sellers prefer a shorter lease period but if it is too short the house may not find a suitable buyer.
After deciding on the property you will make monthly payments just like you would pay the rent every month. In rent to own, a part of the monthly payment intended as the option money, which will go towards the purchase of the house in case you decide to exercise the option to buy.

Improve the property, as it could earn you equity, which would increase the value of the property. The increased equity could also help you obtain a more favourable loan if you decide to exercise the option to buy the property.  

Don’t wait till the last moment to apply for the loan. It is advisable to apply for loan at least two months prior to the expiry of the rent to own period. Refinance loans are always a cheaper and faster process for rent to own schemes.

Here are some dos and don’ts during the lease period:

• Avoid opening new credit. Ensure you are qualified for a mortgage from debt to income ratio perspective.
• Pay your rent the first thing every month.
• Pay your rent by direct debit.
• Pay all your bills on time during the lease period.
• Engage a reputed credit repair firm to clear all existing bad debts.
• Never declare bankruptcy during your lease period.