1. What is Rent-to-Own?

Rent-to-own (also called lease-to-own) is a real estate agreement where tenants rent a property with the option to buy it later. Part of each rent payment may go toward the eventual purchase price.

2. How the Calculator Works

The calculator uses the standard rent-to-own payment formula:

Where:

• \( Purchase\ Price \) — Agreed future purchase price of the property
• \( r \) — Monthly interest rate (as decimal)
• \( n \) — Term length in months

Explanation: This formula calculates the fixed monthly payment needed to pay off the purchase price over the term length at the given interest rate.

3. Understanding the Formula

Details: The formula is essentially the same as a standard mortgage payment calculation, where part of each payment goes toward principal and part toward interest.

4. Using the Calculator

Tips: Enter the agreed purchase price, monthly interest rate (e.g., 0.01 for 1%), and term length in months. Typical rent-to-own terms range from 1-5 years (12-60 months).

5. Frequently Asked Questions (FAQ)

Q1: What's a typical rent-to-own term?
A: Most agreements last 1-3 years, giving the tenant time to improve credit or save for a down payment.

Q2: How is the interest rate determined?
A: The rate is negotiated between buyer and seller, often higher than mortgage rates to account for risk.

Q3: What's included in rent-to-own payments?
A: Typically includes base rent plus a premium that may be credited toward the purchase price.

Q4: What happens if I don't buy at the end?
A: This depends on the contract - you may forfeit any rent premiums paid toward the purchase.

Q5: Are there alternatives to rent-to-own?
A: Yes, including traditional renting while saving for a down payment, or seller financing arrangements.