Rent-to-own or RTO deals are becoming more popular as interest rates skyrocket and home values remain somewhat strong. Sellers are trying to figure out a way to maximize the property value without losing on asking prices due to inflated rates. The answer is simple, RTO agreements where the seller does sell the property in a sense, but they have a renter for a period of time who is paying monthly to own the property. There are several advantages to this but there are also important things you need to know if you are interested in buying:

Rent to Own Homes: 7 Things You Need to Know

1. Downpayments may be required: While downpayments may not be as high as if you were directly buying, owners may demand a significant payment that either goes into the property or is paid directly to them. For example, 20% of a $400,000 property is $80,000. The owner of the property may want that or work out a deal where you have spend it in a certain period of time to cover areas of the home that needed repairs that would have lowered the value of the property.
2. You will not pay interest: The undisputed best part of buying a home via a rent-to-own situation is that you are not borrowing money, especially if you are able to cover any down payment. Because you are not borrowing money, you are not paying interest. That gives the buyer a major advantage and will save them potentially well over $100,000 on the payments.
3. Sellers may want higher value for their home: One thing to be aware of in a RTO situation is that the seller also knows that they are saving you a lot on interest and giving you a deal that is very beneficial. Because of this, they may want to raise the value of the home in the agreement.
4. Every agreement is different: While selling or buying a home is pretty standard as far as the steps that have to be followed and the deals that could be made, the rules are different in a rent-to-own deal. Because you are not borrowing money, lenders cannot dictate the rules and parts of the agreement they are not fans of. Instead, this agreement will be reached mutually and therefore you need to be aware of exactly what you are agreeing to.
5. Poor credit rarely matters: Some sellers will check your credit score. Usually, this will happen if they have a variety of options available and are trying to see which candidates are the most qualified. Usually, the score will not cost you the deal, especially if the seller is happy with the terms.
6. You will save in multiple ways: There are actually tons of ways buyers or renters in a RTO agreement will save money whether it’s via taxes, insurance, interest rates or something else. You will save money in a variety of ways compared to someone buying the property directly.
7. It is still your property: Yes, you are a renter who needs to pay in order to own the property and you will still be responsible for the care of that home. Treat it as your own because it is, even if it’s not official yet.

Buying a property comes with plenty of challenges. If you can skip those challenges and get the deal you want on a property while saving on the interest, why not give it a try. This is one of the most common and unique ways to be benefit both buyers and sellers, especially in a chaotic market.