Rent to Own Mortgage: How to Transform Rent Payments into a Mortgage

Renting to Own: How to Transform Rent Payments into a Mortgage

Why pay rent toward someone else’s mortgage when you could put that cash toward your own?

That’s exactly the thought behind renting to own agreements, which let you rent a property, apply a portion of your rent costs toward the mortgage and, eventually, purchase the rental property from the landlord after the lease ends.

It’s a convenient, albeit complicated, route toward acquiring your primary residence and homeownership that gives you plenty of time to save for a down payment, improve your credit, and apply for a mortgage.

What is a Rent to Own Mortgage?

Rent-to-own mortgages offer a way to get into home ownership without paying full price for your property.

Instead of buying the house outright, you pay rent on it for a set period of time, after which you can buy the house at an agreed-upon price.

You’ll have to make sure you can afford your monthly mortgage payments; otherwise, this type of loan could end up costing more than just renting in the long run.

How Renting to Own Works

Renting to own is a unique animal, and it’s not an option for every property on the market. You’ll need to find a specifically listed home as a rent-to-own property, which can be sparse, depending on your marketplace.

Tip: Sites like and can help point you toward properties in your area.

Once you find a home you like, you’ll need to negotiate what’s called a lease option or a lease-to-own agreement with the landlord. You can enlist a real estate agent’s help in this process; they can help you iron out all the agreement details.

What Does a Lease-to-Own Agreement Include?

  • Set timeframes for when you will rent and when you will be eligible to buy the home. This time period is traditionally from one to three years on most lease-to-own agreements.
  • Details on rent, including how much you’ll pay and what percentage will go toward your home purchase. You may be expected to pay a higher-than-average rent in exchange for a portion of your payment going toward the future purchase price.
  • The total option money you’ll need to pay essentially reserves your right to purchase the home at the end of the lease. This is a one-time, non-refundable fee in most cases.
  • Specify how the purchase price will be calculated once you’re eligible to buy. The landlord may choose to lock in the sale price now, or they may stipulate that it be based on the current market value at the time you buy.
  • Maintenance and care stipulations detailing your responsibilities as a tenant. This could include insurance requirements, lawn care, home repairs, HOA fees, property taxes, and more.

Once your rental period is up, you will have the option to purchase the home, but you’re not obligated to. If the price is too high, you haven’t saved up enough for a down payment or you can’t qualify for a mortgage, you can continue renting or move to a new property as you see fit.

If you do want to buy the property, you’ll need to treat the situation like a traditional home buyer would.

You’ll apply for a mortgage with the lender of your choice, get approved for a home loan, and then purchase the property from your landlord. Once the closing day has come and gone, the home is yours.

How to Make the Best of Your Rent to Own Situation

Renting to own is a great choice if you don’t have a lot in savings or you can’t quite qualify for a mortgage just yet. But in order to come out on top (i.e., a homeowner!), you’ll need to make good use of your time as a tenant.

That means:

  • Save, save, save. You’ll need a down payment once it’s time to buy, so make it a point to save a little every month you’re in the home. If you can, set up auto-drafts from your bank account, so you don’t forget.
  • Work on improving your credit. If you want to qualify for a mortgage once your rental period is up, start working to boost your credit score now. Pay your bills on time, every time, and make an effort to pay down your debts, including credit cards, auto loans, student loans, and more.
  • Take care of your property. Remember, this home is going to be yours in a few months or years, so treat it with care. Water and fertilize the lawn, change out the air filters and have it sprayed and treated for pests when necessary. Treat the home as if it were your own.
  • Find the right lender early. Do your research and find a great mortgage lender early. Work with a loan officer to see what expectations and qualifications you’ll need to meet so that when the time comes, you’re more than eligible to apply.

Are You Considering a Rent to Own Situation?

Rent-to-own mortgages can be a great option for people who need help building up their credit or saving for a down payment. They’re not for everyone, though: you need to be sure that you’ll be able to afford your monthly mortgage payments before signing on the dotted line.

If you’re looking for a way to get into a home sooner rather than later, consider using an alternative financing option like an equity loan or money from friends and family members.

Get in touch with Embrace Home Loans today. We’ll help you understand what to expect as a buyer down the line, and we’ll make sure you’re prepared to be the homeowner you’ve always dreamed of.

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Aly Yale

Aly J. Yale is a freelance writer focusing on real estate, mortgage, and the housing market. Her work has been featured in Forbes, Bankrate, The Motley Fool, Business Insider, The Balance, and more. Prior to freelancing, she served as an editor and reporter for The Dallas Morning News. She graduated from Texas Christian University's Bob Schieffer College of Communication with a major in radio-TV-film and news-editorial journalism. Connect with her at or on Twitter at @AlyJwriter.