What Are the Advantages and Disadvantages of Rent-to-Own Houses?

A major advantage of buying a rent-to-own home is that it allows renters with less-than-perfect credit and limited money for a down payment to move into a home right away, according to Bankrate.com. However, a major disadvantage is that not all the money paid in rent on a rent-to-own home goes toward its purchase price. In fact, only a small portion of the money paid each month goes toward buying the home.

Another pro of rent-to-own home buying is that it allows the buyer to lock in a sales price and determine the terms of the sale upfront, notes Bankrate.com. Even if the market fluctuates and the home is worth more in the years that follow, the price remains the same.

Buying a rent-to-own home allows the buyer to try out the neighborhood and the house without a firm commitment to buy, which is a definite advantage. The tradeoff is that if the homeowner decides not to buy the home, he is not refunded any money at the end of the lease period.

The advantage of selling a home under a rent-to-own structure is that the buyer cares for the property in a way that a standard renter may not because he plans to own the home eventually. Inversely, a disadvantage is that the buyer may back out of the transaction, necessitating going through the process again in the future.