Category: Offers

By:  Stacey Christiansen | March 13, 2019

Anyone tired of paying rent should consider renting-to-own as a path to home ownership. Would renting to own work for you?

Rent-To-Own Overview

Renting to own agreements are becoming more popular as home prices rise and ownership becomes more difficult.

These properties can benefit some people, but there are also scams that you need to be wary of.

View rent-to-own listings near you.

How rent to own works

Rent-to-own arrangements are difficult to explain simply, but they are very similar to a lease. The biggest difference is that rent-to-own agreements contain “option-to-buy” clauses that outline the terms of your purchase of the home when the lease ends.

After you sign, you’ll pay a certain premium on top of your monthly rent. The extra money is saved for your down payment, generally in some form of escrow account.

Browse MyRentToOwn listings.

Things to look out for:

• Obligation-to-buy: These might give you a better deal, but it’s also a considerable risk to you if there’s a chance you won’t be able to make your down payment or qualify for a mortgage at the end of your lease term.
• Falling prices: If your home’s value rises during your lease term, the price you agreed upon up front will seem like a steal. But if the prices fall, you’ll be locked into a bad deal.

Should you rent to own?

If you’re having a hard time saving for a down payment, or if credit issues are holding you back, a rent-to-own arrangement may help you reach your home ownership goals, and possibly get you there sooner.

If you’re not sure if you can qualify for a mortgage by the end of your lease term, you should stay away from rent to own. There’s too great of a risk that you’ll lose the premiums you’ve saved for the down payment.

However, if you’re confident in the price of the home rising over the next few years, or are willing to put in sweat equity to raise the value yourself, you may benefit from locking in a lower price for the home.

Check out rent-to-own properties near you.

Beware of Scams

There are many scams that seek to take advantage of people trying to buy their first home, the tips below can help you avoid them.

• Beware of below-market-value deals. Rent-t0-own opportunities involve paying additional premiums on top of monthly rent, so anything below market is suspicious.
• Check the house out carefully. Use an inspector and make sure that the home’s mortgage is paid and the property taxes are up-to-date.
• Like any other online scams, never give your information away prior to seeing the house and meeting the seller. Also, never give anyone any deposits or down payments before meeting them.
• Have an attorney look over any documents provided by whoever you’re working with.

Final Thoughts

Renting-to-own can be a great path to ownership, but it comes with it’s own set of opportunities and risks different from what most renters or home buyers face. Consider your unique situation before browsing rent-to-own listings in your neighborhood.

Written by:  Stacey Christiansen | March 13, 2019

Refinancing could save you thousands. Learn when to make a smart refinance decision and when to stick with your current loan.

Editor Update 3/23/2019: Fed signals rate drop – great news for those who missed out on low rates in 2017 and 2018.

Refinancing Overview

Refinancing your home means shopping for a new loan with better terms than the loan you already have. If and when you’re approved for the new loan, your old loan will be paid off completely, and your future payments will be made to your new lender.

Refinancing a mortgage can potentially save a home owner thousands on a home loan, but it’s not always that simple. Interest rates, closing costs, how long you plan to stay in your home, and why you’d like to refinance are all important considerations that we’ll discuss below before listing our top refinancing partner picks for 2019.

Five Reasons to Consider Refinancing

1. Lower Your Monthly Payment

If current interest rates are lower than the rate you are paying on your mortgage, refinancing could lower your monthly payment. For example, if you have $150,000 remaining on your mortgage at 7% for 30 years, your monthly payment (principal and interest) would be around $998. But, if you refinanced to a 5% loan for 30 years, you would pay $808 and save nearly $100 per month over the course of your loan.

However, there are closing costs involved with a new loan. So be sure to factor those into the your equation. If it costs $1000 to finance the loan above, it would only make sense to refinance if you plan on staying in your home for more than 11 months, because 10 months of saving nearly $100 per month would pay off the closing costs involved with setting up the new loan.

2. Switch to a Short-term Loan

It might also make sense to switch from a 30 year to a 15 year mortgage. This would substantially lower most interest rates, thought the payment would likely be higher.

3. Change from an Adjustable-rate to a Fixed-rate Mortgage

Adjustable-rate mortgages (ARMs) are great for minimizing your monthly mortgage payment in the early years of owning a home. But when interest rates start to rise, so do the monthly payments on an ARM. To avoid the increasing payments, you can switch to a fixed-rate mortgage. While the monthly payments on a fixed-rate mortgage may initially be higher than the payment on your ARM, you will have peace of mind knowing your payment will remain the same, even if interest rates continue to rise.

4. Change from a Fixed-rate to an Adjustable-rate Mortgage

Sometimes it makes sense to switch from a 30-year loan to a one with a shorter term. For example, if you know you will be selling your house in the next few years, switching to an adjustable-rate mortgage could lower your rate and your monthly payment until you sell your house. Another example is when short-term rates are lower than long-term rates, and refinancing into an ARM would save you money at least during the fixed-rate period.

5. Take Cash Out of Your Home Equity

When you have equity in your home, cash out refinancing allows you to turn that equity into cash. There are several providers of cash out refinancing that our team recommends.

Is Now the Right Time?

Many finance specialists will tell you that refinancing makes sense if the interest rate drops by .5%. But that’s not necessarily true for everyone. If your closing costs are high, or you plan on moving sometime soon before you can recoup the closing costs, you may need to wait for a bigger drop in the interest rate, or a deal with lower closing costs, before refinancing makes good financial sense.

If you need cash now for one or more of the following reasons, you may consider a home equity loan or a cash out refinance.

✓ Making home improvements

✓ Purchasing an investment property

✓ Paying for a child’s education

✓ Paying off credit cards, medical bills or other higher interest debt

Check out our guide to home equity loans to get quick access to cash for major purchases or expensive debt payments.

How to Shop

You’ll need to make sure you have your financial life in order. Have the following information on hand and begin collecting quotes and additional information.

1. Check your Credit

Read our guide to credit score management or skip right to checking your credit score, because the higher your score the better the rate you will get.

2. Understand your Current Loan

Make sure you have a complete understanding of your current loan: terms, payoff amounts, equity, interest rate, etc.

3. Get Free Quotes and Information

Collect quotes from reputable lenders. If you don’t have any in mind, our readers have used the following tools to get connected with credible lenders.