RentToOwn-HouseFinder.com

How does rent to own work to purchase a house?

I've seen ads in papers that say "rent to own" to purchase a house. How does that work? I live in Illinois if that helps anyone.

Public Comments

1. It works the same way that a regular mortgage would except that technically you don't have a lender so to speak. The seller will carry the note on the house while you pay them. Basically, you put a down payment on the house, agree to a monthly payment, keep up on the payments and after a determined amount of time, you own the house or have a mortgage company take over the loan. It is also known as Contract For Deed.
2. As I have been told it means that you put a percentage down to the owner and then you pay the owner every month like you would be renting it. So they are owner financed which just means you pay them directly not a bank. I am not to sure about taxes I think they stay in the owners name till the house is paid for. I do know someone who was doing this and they decided not to buy the house they were "renting to own" she was able to get out of the contract alot easier then if she had gone through a bank or mortgage company. You want your lawyer to take a look at any papers before you sign them to make sure they are legal. Hope that helps a little
3. Rent to own works like this. You pay a monthly fee on the home you are looking at. The fee is the current monthly payment to the bank on the existing mortgage on the property. You then will pay an additional fee above the monthly "rent" to cover the down payment you will eventually make to purchase the home. This is where it can become complicated and you will have to protect your interests very carefully. The extra money you pay each month must not go to the title holder directly. Talk to a lawyer and have the money placed into a special account for the down payment. You will earn all the interest off this money and that is important. you will then have to be specific on a purchase date for the home and this will usually be 24 months. None of the rent you pay goes towards the down payment, that is just the rent only. If you give the money directly to the title holder you may never see it again. Do nothing on any contract without first talking to a lawyer, he/she will protect your interest and level the playing field for you. Good luck
4. I completely depends on what state you live in. Some states have manditory wording for Contracts For Deed etc etc.
5. I can't say anything more than what has already been said expect, if you do a rent to own - you don't get title of the house until you have paid off the house. If something goes wrong, the "seller" can take the house back at any time. A more secure way to buy a house with a seller-carry is to write up a land contract.
6. Part of each rent payment is applied to the down payment of the house at the end of the lease.