Advantages of renting a home with the option to buy

There are several unique advantages to a home rental with the option to buy, especially for those who want more flexibility or have credit problems.

Because of the real estate slump in many areas of the country, sellers are increasingly offering rent-to-buy options on their properties in the hopes of getting them occupied. A home rental with the option to buy is a rental lease for a specific period of time that includes a particular stipulation, when the contract runs out, the renter has an option to purchase the property with all previous rental payments counting towards the sale, for example. Besides giving the property owner a way to immediately earn rental income and still potentially make a sale, rent-to-buy leases have several specific advantages for the buyer as well.

Because most rent-to-buy agreements base the price of the property on the market value when the lease was created, they give the renter a considerable amount of leeway in making a purchase decision. If the property value of the home drops over the time period of the contract, the renter can simply opt out of the option to buy. If the equity value rises, the rent-to-buy leaser has the option to switch over to the purchase plan at the price of the property when the contract began. This is often called the "wait and see" approach, as it gives the potential buyer time to see whether purchasing the home will be a good investment or not before committing to it. Should a personal disaster strike, like a job loss for example, the consumer is able to simply walk away from the contract without going into foreclosure.

Tight credit markets often equal greater income requirements and payment stipulations for potential home owners, including large down payments or the addition of cosigners. The rent-to-buy contract is often used as a way for first time homeowners or those with credit problems to make a property purchase that otherwise would just not be possible.

The big advantage of a home rental with the option to buy is that down payments, loan approvals and mortgages are not needed, which also means there is no need for mortgage insurance. The window of time provided by the rent-to-buy agreement also allows potential buyers to improve their credit score.

While rent-to-buy programs may not offer the low interest rates that a traditional mortgage might, and it may have extra fees or non-refundable deposits involved, the advantages of a home rental with an option to buy are still persuasive for those who want maximum flexibility or have credit issues.