General Information On Rent To Own

Lease Option transactions are also known as Rent To Own, or Rent to Buy transactions. In a Lease Option, the Landlord-Seller leases the home to the Tenant-Buyer and the Tenant-Buyer has the option to purchase the home for a pre-determined price at any point prior to the end of the lease. The main components of a Lease Option transaction are the lease term, the purchase price, the down payment, and the rent credit.

Terms of Lease

Rent To Own buyers and sellers enter into a lease agreement for a fixed period of up to 36 months.  At the conclusion of the lease, the buyer will have the option to purchase the home from the seller.

Purchase Price

The purchase price will be determined before the Rent To Own lease agreement is finalized and signed by both buyer and seller.  The price is fixed and will not change after negotiated and agreed by both parties.  It is usually set at slightly above the current Market Value of the property.

Down Payment Credit (Option Consideration)

The down payment is usually 3% of the current Market Value of the property.  If the option is executed by the buyer it is applied to the purchase price.  If the buyer does not purchase the house the down payment is kept by the seller as an Option Consideration.

Rent Credit

In addition to the down payment credit, the seller will offer monthly rent credits.  A “Rent Credit” is a portion of the monthly lease payment that is applied to the overall purchase price if and when the Rent to Own purchase is executed at the end of the lease.  The amount of the rent credit is usually around 15% to 20% of the monthly payment.