Rent To Own Example
Option Fee = $6000
The Option Fee is paid at the beginning of the lease. This gives the
buyer the option to purchase the home for a given price at a given
time (usually at the end of the lease). This fee in non-refundable
and usually does not constitute a down payment, deposit, or credit.
Rent = $1800
total amount the tenant/buyer pays on a monthly basis to live in the home
during the lease period.
Rental Credit = $500
In many arrangements a portion of the rent payment is credited to the down payment at the time of the purchase. This is known as the Monthly Rental Credit. This accumulates during the lease period on a monthly
basis. At the end of a 36 month lease the accumulated rental credit
would be $18,000.
In comparison to a standard mortgage at 8% this example actually builds equity faster during the lease phase with a monthly rental credit of $500. The mortgage would have a principle and interest payment of $1468/month. If you added PMI, insurance, and taxes to this amount it may result in a payment as high as the rent to own agreement.