How Much Does Rent-to-Own Cost Me? Clarksville TN / Oak Grove KY -- Here is your answer!
Owning a home is often considered the American dream — and it's an expensive one. Many residents in Clarksville TN / Oak Grove Ky often ask us how much does rent-to-own cost?
To discuss the topic showing above, first, let’s talk about the rent. The monthly amount paid to the seller is just that — rent! Due to the recent Dodd Frank Act, sellers can no longer offer rent credits.
Home’s purchase price is the next important thing we need to consider. In most deals, you will agree to a purchase price upfront, typically current market value or a bit higher. A key point in either scenario, however, is that the purchase price is also negotiable — just like you’re buying a house the traditional way.
Here is an example that we can look at. You enter a three-year rent-to-own agreement for a home. The option fee is 3% of the home’s $200,000 purchase price, or $6,000. This is due up front. Your monthly rent is $1,600.
At the end of your three-year lease term, assuming you exercise your option to purchase, the fixed $200,000 purchase price will be discounted by the amount of the option fee. So subtracting the $6,000 option fee brings the price down to $194,000.
And remember: If you decide not to purchase the house, the option fee and credits are nonrefundable.