Rent, buy or rent-to-own a home? Here are some tips.

Discover what option is best for you.

Whether to rent or own a home can be a daunting decision during even the most stable of times. But with the housing market in flux and many jobs shifting to hybrid or work-from-home models, there are now more factors to consider before taking the ownership plunge.

Both renting and owning have their upsides and downsides. There’s also a third option, rent-to-own (RTO), that’s growing in popularity. Choosing what’s best for you comes down to a few key factors. These include your financial situation, lifestyle, professional situation and how much you want to customize where you live.

What to consider when renting
Deciding to rent has some obvious benefits, not the least of which is flexibility. You can move when you want (based on the terms of your lease agreement) and take more time shopping around while you wait to buy. This is especially beneficial if housing prices are trending higher and you want to wait it out for a better deal.

Some people may prefer only to rent. One of the biggest reasons might be because, in most cases, landlords are responsible for repairs. They may also cover some basic expenses like utilities as part of your monthly payment. As a renter you don’t have to pay any property taxes, either.

On the other hand, while renting gives you more freedom, it also comes with more uncertainty. Landlords can raise your rent or force you to relocate if they decide to sell the property.

While you’re in the home, you can’t make any major (or sometimes even minor) changes, from the appliances you use to the color of the walls. Most of all, there’s no way to take advantage of the potential of equity (the value of your home versus what you owe) or the increased value of a home you own.

What to consider when buying
For those both willing and able to make the financial commitment, home ownership may be the ideal option. The long-term benefits are almost always worth it. You can build equity and potentially use your home’s value to make other investments.

There are no landlords to worry about, which means more stability with your payments (for example, if you have a fixed-rate mortgage). You’re free to make any improvements, upgrades and decorate however you’d like — go ahead and paint an accent wall!

When you own your home, however, you’re responsible for repairs and remodeling, or other expenses beyond the mortgage such as heating and electricity. And while your investment would most likely increase in value over the long term, there’s a risk of losing money if home values decline.

The rent-to-own option
Simply put, rent-to-own (RTO) agreements are when you agree to rent a property for a predetermined period — typically one to five years — with the option (or, in some cases, obligation) to purchase the home when the lease expires.

One of the biggest benefits to the RTO model is flexibility. It can give you time to get your finances in better shape, build up your credit (you’ll need a good credit score to qualify for most mortgages) or save money for the eventual down payment.

If you’re ready to explore the RTO homebuying approach, here are a few ways to get started:

  • Find RTO properties: A licensed real estate agent can help you evaluate your needs. You can also go online and check out sites like HomeFinder, Home Partners and Divvy, among others.
  • Agree on upfront fees: The buyer typically pays a non-refundable, upfront fee called an “option fee.” This locks in the option to purchase the home at an agreed-upon future date, at an agreed-upon price — even if the home value goes up or down in the meantime.
  • Agree on how much rent goes toward your principal: In your contract, you can work with the landlord or seller to determine how much, if any, of your monthly rent can go toward your home purchase.


No matter what path you choose — renting, owning or rent-to-own — make sure you understand all the elements and details. That’s the best way to ensure you’ll be happy no matter what you decide.

This page and the information contained herein is for educational purposes only. The information is not intended to provide legal, investment, or financial advice or to indicate the availability or suitability of any product, service, or strategy to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional. Any links to other websites are included for your convenience only. Bread Financial does not endorse any product or service, and is not responsible for the accuracy or reliability of the information, made available through such sites.