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  • Writer's pictureNick T.

Is Rent-to-Own a Bad Idea?

Updated: Dec 12, 2023

What is Rent-to-Own?

Are you dreaming of owning a home, but unable to qualify for a mortgage? You may want to consider a rent-to-own arrangement. A rent-to-own contract allows you to rent a home for a specified period while providing you with an option to purchase the property before the end of the agreement term. Rent-to-own contracts typically fall under one of two categories. In a lease option agreement, you’ll have the ability to buy the home if you want to, but you are not legally obligated to purchase it. If you change your mind throughout the course of your rental term, you are free to walk away with no strings attached. With a lease purchase agreement, on the other hand, you will be legally required to buy the home.


If you are looking for a path to home ownership, this can be a good option for individuals who don’t immediately qualify for a mortgage. If you are suffering from short term credit problems, a rent-to-own contract can help you build equity while you work to repair your credit score. Another advantage of rent-to-own properties is the sale price. Typically, the purchase price for your property is set in stone at the beginning of your lease period. No matter what happens to the market throughout your rental term, the price will remain the same. One benefit that you may have failed to consider is the ease of moving. Moving is a major hassle, and it can be expensive. With a rent-to-own contract, you will already be living in your newly purchased property, thus avoiding the process of moving.



Compared to traditional rentals, you’ll pay higher rental fees with a rent-to-own property. If you are seeking cheap rent, you might want to look for other options. Rent-to-own agreements often include a nonrefundable fee that is factored into your rent, which can increase your rent by up to 15%. Alternatively, some contracts tack this fee onto your down payment later down the road. One of the major disadvantages of rent-to-own is that there is no guarantee you will qualify for your mortgage when your rental agreement concludes. Even if you improve your credit, there is always a possibility that the owner will default on their mortgage and the house will face foreclosure, leaving you without a home. Make sure that you carefully review your contract before you sign, and if necessary, enlist the help of a lawyer.

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