1. What is Rent-to-Own?

Rent-to-own is a housing agreement where tenants rent a property with the option to buy it later. Part of the rent payments may go toward the eventual purchase price.

2. How the Calculator Works

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

Where:

• \( Purchase\ Price \) — The agreed future purchase price of the home
• \( r \) — Monthly interest rate (as decimal)
• \( n \) — Number of months in the agreement

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

3. Understanding the Formula

Details: The formula is essentially the same as a standard loan payment calculation, accounting for the time value of money and compounding interest.

4. Using the Calculator

Tips: Enter the agreed purchase price, monthly interest rate (for example, 0.01 for 1%), and the duration of the agreement in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's a typical rent-to-own term?
A: Most agreements last 1-3 years (12-36 months), though longer terms are possible.

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

Q3: What's included in the monthly payment?
A: Typically includes principal, interest, and sometimes property taxes/insurance, similar to a mortgage payment.

Q4: What happens if I don't buy at the end?
A: This depends on the contract - you may lose any option money or rent credits applied toward purchase.

Q5: Are there alternatives to rent-to-own?
A: Yes, including lease options, land contracts, or traditional saving for a down payment.