Rent a Home to Buy

'Rent a home to buy' is quite a old idea. It's a plan that is not right for everyone and may not be right for most.

Here is how it works. You agree to rent the property for a period of time normally for several years allowing sufficient time to build the down payment. A portion of the rent being paid by you is applied to your down payment for an agreed-upon price. The amount to be applied to your down payment is based on what the seller's current monthly mortgage is, with an added option fee for the seller. The option fee varies, 1% to 5% of the price, which is credited to the purchase price. The borrower also pays an additional rent premium that is also credited to the purchase price.

Any repairs required during the rental period and made by the seller will come from the amount of funds that are being accumulated, or you can make the repairs yourself.

You cannot claim the property on your income tax until you actually have title to the property. Repairs made during the rental period may not be deducted from your income tax (please discuss your individual case with your tax consultant). You are also responsible for maintenance of the grounds.

Last but not the least, in case you don't proceed with the purchase, any money that may be held towards the down payment (option fee as well as the rent premium) is relinquished to the seller. Also, beware that normally there is no negotiation for the asking price. In most cases, it is kind of take it or leave it when it comes to the asking price.