Monopoly is a classic board game found in most homes. The board game provides hours of entertainment, family time, and fun, but gives many children their first introduction to financial and money management as they purchase properties, earn a salary, and obtain a mortgage. Sadly, Monopoly doesn’t give kids insight into rent-to-own, an amazing strategy people use to buy a home when traditional options do not work for them. Doing so would make the game far too complicated. However, many people do not realize that they can purchase the home they love using a lease-purchase agreement through a rent-to-own buyer.
What is Rent to Own?
Rent-to-own starts by finding the home perfect for your needs. RTO homes are available across the U.S. although some areas offer more plentiful selections than others. Once you find the home, the next step is to enter into agreements with the landlord. You’ll determine the rental amount and the total cost of the home at this time.
Next, renters pay an option fee for the right to purchase Park Place, using Monopoly as our example once again. You’ll pay 3 percent as an option fee. In the case of Park Place on Monopoly, the cost is $350, so you pay $10.50 and can then buy the home within three years. For now, you can still claim rights to Park Place and can use the property to your benefit however you wish.
Each month, pay the rent to the landlord as normal. Add a small premium fee to each monthly rental payment. This money goes toward the down payment when you buy the home. In the meantime, you live in the home, pay monthly rent, and have all the perks that you need as a renter.
Build up your credit score or rebuild your credit after you’ve experienced financial hardships during the rental period. Most landlords give buyers up to three years to secure the home purchase. This gives buyers sufficient time to improve their credit score and save money to apply toward the down payment.
Related: Learn more about How Rent to Own works
What is a Mortgage?
Most home buyers use mortgages to complete the home purchase. It is the easiest and most common strategy for typical buyers, but if you don’t fit those criteria, you need other options.
A mortgage means that you buy a home after a bank provides you money to purchase the property. You repay that money over the course of time. The bank adds interest to the mortgage loan. If you buy Park Place, you pay a $70 deposit and pay the remaining $280, plus interest, over a designated amount of time. People need good credit to qualify for a mortgage. The better a person’s credit, the better the interest rates they receive and the easier qualifying for mortgage approval becomes.
Rent to Own and Mortgages in Monopoly
The best thing about rent-to-own and mortgages is that you can become the Park Place owner without paying the full $350 upfront, without these outrageous closing costs, and without stress and worry. Buying a house through RTO locks in today’s housing price so you pay the same purchase price down the road.
You have every opportunity to become a homeowner without headaches with both options. Although Monopoly shows only one way to become a homeowner, other choices are out there.
Rent to Own vs Mortgage
If you qualify for a mortgage, buy your home using a mortgage. You can get home loans with ease and become a home buyer sooner by using a mortgage rather than a rent-to-own agreement. RTO is best for people that need time to save money to apply to the down payment and people that need to rebuild or build up their credit. If you qualify for a mortgage, this alternative deal may be a waste of time and money.
In Monopoly, the goal is to pass go and collect $200 so you can acquire more properties. To achieve this feat you must make good decisions and of course, have a little luck on your side.
When you look into renting your own home, you are making beneficial decisions that help you build equity, improve credit scores, save money to use as a down payment and on closing costs, and avoid the harsh real estate markets. It works favorably for anyone that does not currently qualify for a mortgage and those who need extra help and time before they can become homeowners.
Rent to own is a great way to buy a home for people that need time and a little boost to get where they need to be to become homeowners. Maybe if the option was available in Monopoly, it could help more people. That, of course, is impossible, since this would make the game far too complicated for the average player.
Deciding Between Rent to Own and Mortgages
Monopoly sometimes throws curve balls at players. You probably know this first hand if you’ve sat down and played the game in the past. However, you wait it out and things improve drastically. That is how buying a home works.
You don’t always land on every square in the game of Monopoly and the housing market works the same way. Some properties are worth the time and money and others are not. It may take time to find a home whether you use a traditional mortgage or a rent-to-own option. Continue the search and soon, signing a rent agreement on a rent-to-own home will happen.
Monopoly is nothing like real life, especially for those who cannot get the traditional mortgage payment and need to use a rent-to-own option. With this buyer’s option around, however, you can achieve dreams of becoming a homeowner in the next few years.