1. What is Rent To Buy?

Rent To Buy is a housing arrangement where a tenant pays rent that includes both the mortgage payment and an option fee that can be applied toward purchasing the home in the future. This allows potential buyers to build equity while renting.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• Mortgage Payment — The monthly mortgage amount the owner would pay
• Buy Option Fee — Additional monthly payment that can be credited toward purchase

Explanation: The total rent combines the base housing cost (mortgage) with the additional amount that builds your purchase credit.

3. Importance of Rent To Buy Calculation

Details: Understanding the total cost helps renters evaluate whether a rent-to-own agreement makes financial sense compared to traditional renting or buying.

4. Using the Calculator

Tips: Enter the mortgage payment amount and the additional buy option fee. Both values should be positive numbers representing monthly costs.

5. Frequently Asked Questions (FAQ)

Q1: What's typical for buy option fees?
A: Option fees typically range from 5-20% of the monthly rent amount, but vary by agreement.

Q2: Is the option fee refundable?
A: Usually not if you don't purchase, but this depends on the specific contract terms.

Q3: How does this compare to regular renting?
A: Rent-to-buy costs more monthly than standard renting but part goes toward eventual purchase.

Q4: What happens at the end of the term?
A: You typically have the option to buy the home using accumulated credits or walk away (losing the option fees).

Q5: Are there tax benefits?
A: Option fees usually aren't tax deductible, unlike mortgage interest when you own the home.