How to Do a ""Rent to Own a Home"" Contract. For the seller, it provides monthly rental income and the potential that the home will be sold after an agreed-upon period of time. At the end of the agreement, a balloon payment comes due and the tenant must arrange financing with a bank or other outside lending source.
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Rent to own, which is also known as a lease purchase, is a contract between you and the seller to buy a house at a future closing date. This can be anywhere from one to three years after the contract is signed.
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Rent-to-own can also be structured as a type of instalment sale, with an instalment agreement and a separate lease agreement running concurrently. "The buyer could rent the property for a period, at an agreed rate, while paying off the purchase price in separate instalments," says Fourie.
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The Complete Guide to Rent to Own Houses An Overview of the Rent to Own Process . When it comes time to consider purchasing your home, a viable option for many people is the rent-to-own (RTO) option. This practice is gaining favor with young people and families who may not have the means or the credit to secure a mortgage loan.
In a rent-to-own agreement, a buyer agrees to rent the home for a set amount of time before exercising an option to purchase the property when or before the lease expires.