Should I Rent or Buy . . . or Both?

Rent-to-Buy Deals are the Order of the Day

These are altogether confusing financial times. If you’re a seller with a house languishing on the market, you might wish you could get rid of the mortgage, rent a place, and get a loan till payday.  If you’re a potential buyer, you might be doing something as seemingly contradictory as looking online for a mortgage, a place to rent, and a payday cash advance all at the same time.

Home buyers are scarce and home financing is tight.  Given the current economic vagaries, it’s hardly surprising that rent-to-buy deals are on the upswing.  In fact, rent-to-buy deals are so popular right now that if you go to ForSaleByOwner.com, and click on "Advanced Search" you'll find a special category for "Lease-to-Own" homes.

How renting to buy works

Rent-to-buy deals (or leases with options to buy) typically require buyers to pay option premiums each month on top of regular rent, along with a one-time, upfront, option payment of about three to five percent of the agreed purchase price. At the end of the lease term, if the buyers choose to exercise their option to purchase, the monthly option premiums and one-time option payment are applied to the purchase price.

For example, if the buyers in a rent-to-buy deal agree to purchase a house for $200,000 after renting it for a term, with an option payment of $10,000 up front, and monthly option premiums of $500 in addition to $1000 monthly rent, they will have paid $16,000 of  the $200,000 purchase price at the end of one year, or $28,000 at the end of three.  If they opt to buy at the end of the lease term, the buyers will finance the remainder of the agreed purchase price. ... click here to read the rest of the article titled "Should I Rent or Buy . . . or Both?"