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What does it mean to rent-to-own a home?

On Behalf of | May 10, 2022 | Real Estate Law

The real-estate market is painfully tight, and would-be homeowners are feeling the pinch. In a seller’s market, it can be hard to get enough money down on a home, especially when sales prices keep soaring over the asking amount.

Rent-to-own can be a nice alternative option, and it can help both sellers and renters. In this sort of house deal, you start out as a renter with an agreement that gives you an option to buy at a set price. 

Naturally, the option isn’t open-ended. It’s not uncommon for rent-to-own contracts to run, at most, two or three years before the tenant has to decide if they’re going to buy (although some do grant renters much longer options).

What benefits does rent-to-own offer?

Aside from giving you time to decide if you like the area and the home before you fully commit, rent-to-own properties can give you time to get your finances in order. Your agreement may specify that, if you decide to exercise your “buy” option, part of your rent will be credited toward your downpayment, which can lower your mortgage rate and save you money in the future.

It also gives you time to repair damaged credit that may have kept you out of the housing market in the past, especially if you have old charge-offs or a bankruptcy on your credit report.

In Connecticut, rent-to-own purchases must have written agreements to be valid, and they must be carefully handled so that they fully comply with the state’s laws. If you’re considering this kind of agreement with a property owner, make sure that you have the contract carefully evaluated before you sign.