It’s a financing scheme that relies on renting rather than interest rates. Basically part of your monthly payments goes towards paying the rent of the item, and the remaining goes towards buying a share of the principal. So for example, let’s say you rent-to-own a house that’s worth 100k, the financial company will calculate the rent of a comparable house to be, say $1000 per month. So if you pay $1500 per month, 1000 goes towards the “rent” and 500 towards “principal”. The next month, they will calculate rent based on the $99500, so if you pay the same amount, 995 will go to rent and 505 towards principal, and so on…
They idea is that if you continuously contribute to the principal, over time, your rent declines until ultimately on the last payment, you will be paying like $1 in rent and the last installment of the principal.
I hope I didn’t confuse you! ;-)
2007-11-29 04:03:01
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answer #1
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answered by Wata 2
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2016-09-09 22:51:12
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answer #2
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answered by Delphine 3
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Rent to own housing:
It's for people who need a little help putting together a down payment toward buying a house. The idea of a rent-to-own house is that a portion of your monthly rent is set aside by the owners for let's say 2 years at which time you have the option to buy the house and use that money as a down payment.
Rent to own furniture:
It's for people who either have "no" credit or "bad" credit. A person can rent a whole house full of furniture for a reasonably small monthly payment (about $500.00) and after two or three years they own it. The rent-to-own company does not check your credit and all you have to do is prove you have a job and prove your income. The furniture is of average quality. It's a good way to afford furniture if you don't have credit.
2007-11-29 04:01:05
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answer #3
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answered by mollyflan 6
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Rent to own is typically done on stuff like TVs and not real estate.
Let's say I buy a house, and I get a mortgage. As I make payments, I own a portion of the house. Some of my payments go towards interest on the loan, but my payments on "principle" are in effect me buying part of the house. Now let's say at some point, I own 50% of the house (I've paid 50% of the principle up to this point), and I must move. I sell the house. I get 50%, the bank gets 50% (well, actually the bank gets whatever I still owe them and I get what's left over, so if the price has gone up, good for me, and if the price has dropped since I bought it, too bad for me).
Now suppose I "rent to own". On a TV, it works like this. Say there is a $500 TV. I can "rent", maybe say for $10 a month. The rental company isn't doing this out of the kindness of their hearts - they want to make money on this. So maybe, once I've paid in $1000 in "rent", I now "own" the TV. If I rent it long enough, they will just let me keep it. But say I've paid $900 in rent and I can't afford to pay anymore. The rental company owns it (100% of it - I do not own even a portion of the TV, legally).
Rent to own is not such a good deal for me. It's a very expensive way to buy something. Generally, the only people who are stuck having to buy things this way are people who cannot get a loan due to bad credit, etc. Rent to own is something you might have to do if you have no other choice.
2007-11-29 04:00:57
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answer #4
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answered by Damocles 7
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Rent to own house? Rent to own furniture? Be more specific...If a house....then rent to own means that a portion of your monthly rent payment will go toward ownership in the home (usually a good situation if your credit is not so good). There are many good points about this type of situation and some not so good. I think there may be some tax benefits to you as an part owner whereas when purely renting there are none. However, I would check with an accountant about the tax issues and have someone not involved in the deal who is familiar with real estate deals like this take a look and see if it is to your benefit to be in this scenario rather than renting. Study the contract very carefully...the reason is that sometimes a rent to own may work in the owners benefit not yours and you may be better off to continue renting regardless of the hype and marketing ploy the advertisier of the property is trying to tell you. Things are not always as the appear, so be aware.
2007-11-29 03:59:33
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answer #5
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answered by DWInSTL 3
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Rent to own is a very poor way to purchase a home. Your monthly payment is usually a good deal higher than rent alone. A small amt is deposited toward the purchase of the property. You would be much better off to build your own credit and buy a home outright. Your payment could actually be less while buying than rent or rent to own.
To build credit you can go to a credit union and borrow $500. Place that in a savings account, make monthly payments back to the credit union, making sure there on time or early. When you have repaid this loan your credit will reflect your ability to make timely payments making it easier to get a loan. Learn to budget your income during this time so that you can have a down payment available for your home. Know that a person can only afford one weeks salary for living quarters. Using this as a guide, shop for homes you can afford and do NOT over burden your self causing failure.
2007-11-29 04:27:06
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answer #6
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answered by tweedbfly 2
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Rent to Own is for people that don't have the required down payment for lending regardless of credit. It's a contract between you and the home owner, typically lasting two years in which you pay a certain amount above the average rent that goes into an escrow account until the end of your contract. That money is then given back to you which you use as your down payment. BEWARE, if you still are unable to get financing the owner of that home keeps all the money in escrow for themselves. So make sure everything else is in order, or will be in order before your deadlline if you are considering going into such a contract.
2007-11-29 04:05:48
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answer #7
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answered by deforestmama 2
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The way it works is You pick what you want, say furniture and you sign up to pay so much a week. when you have paid what ever your agreement was you own the furniture out right. Draw back you may be paying a large premium to do this. You might pay $1000 for $600worth of furniture. This works for people that have no credit or if you are only needing the items for a short period, On a house That is called carrying a contract. this is where you make payments to a person and not a bank
2007-11-29 03:56:32
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answer #8
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answered by redd headd 7
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I did this once on a TV when I was younger. If you have like no credit at all its a good way to build it. But its expensive...Like the tv I got was a retail price of aroind $1000. My payments were $200 bucks a month for two years. The interest comes out to be over 50%. The way it works is you pay the payments and after a certain time you own it. However, if you decide its too much or dont want it or skip a payment they take it back with no late charge or anything.
2007-11-29 03:53:50
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answer #9
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answered by ? 2
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Rent to own is paying a certain amount of money each month for a period which is stipulated in the contract. Then at the end of the term of contract, you usually pay a certain larger sum to then own it. It works out a lot more than if you just saved and brought it then and there. Because interest is added on in the long term.
Ann
2007-11-29 04:08:21
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answer #10
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answered by Ann 1
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