What does “rent with an option to buy” mean?
It’s tough to sock away funds toward a down payment when you’re laying out rent every month. No wonder rent-to-buy arrangements seem like a sweet deal.
How They Work: These agreements allow you to pay rent monthly on your apartment or house, with some or all of your payments being used to defray the cost of eventually buying it. Usually you’ll have a contract at the outset specifying how long you can rent and what portion of your payments count toward the down payment.
The Pitfalls: The apartment or house may carry a higher price tag than if you had bought it on the open market. That’s because the seller is getting the money in dribs and drabs, not all at one time. Also, at some point, you’ll still need to get a regular mortgage to complete the deal.
Tip: These transactions can be complicated, so find a buyer’s agent with experience in lease-to-buy deals. She’ll walk you through the process and protect your interests.
See More: Buying a Home , Renting