1. What is Rent-to-Own?

Rent-to-own is a housing arrangement where tenants rent a property with the option to buy it later. Part of each rent payment may go toward the future purchase price.

2. How the Calculator Works

The calculator uses the standard payment formula for installment purchases:

Where:

• \( Purchase\ Price \) — The agreed future purchase price of the home
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of monthly payments

3. Understanding the Formula

Explanation: This is essentially the same formula used for mortgage payments, calculating the fixed monthly payment needed to pay off the purchase price over the term at the given interest rate.

4. Using the Calculator

Tips: Enter the total purchase price in dollars, the monthly interest rate as a decimal (e.g., 0.01 for 1%), and the term length in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is this different from a mortgage?
A: Rent-to-own typically has higher interest rates and shorter terms than traditional mortgages, and may include rent credits.

Q2: What's a typical interest rate for rent-to-own?
A: Rates vary but are often higher than mortgage rates, typically 8-15% annually (0.0067-0.0125 monthly).

Q3: Are there additional fees in rent-to-own?
A: Many agreements include option fees (1-5% of purchase price) and may have maintenance responsibilities.

Q4: What happens if I don't buy at the end?
A: Typically you lose any option money and rent credits, unless the contract specifies otherwise.

Q5: Should I get legal advice before signing?
A: Absolutely. Rent-to-own contracts can be complex with significant financial implications.