To rent or rent-to-own: Which is right for you?

In today’s ever-changing world, deciding whether to rent or own a home is crucial. As more and more properties are developed and more individuals seek to purchase their own house or condo, some property sellers and developers now offer rent-to-own schemes to get competitive and make owning more accessible. For some, a rent-to-own scheme is ideal—if you are renting anyway, might as well put that monthly rent towards ownership, right?

However, both options have their own set of considerations, addressing different financial situations and long-term objectives. Understanding the pros and cons between renting or renting to own can help you make important decisions that match your financial situation, needs, and goals.

There are several factors to weigh when deciding between renting and renting to own. Here is a breakdown that will help you make an informed decision.

Renting or leasing

Pros:

• Flexibility. Renting provides flexibility because you are restricted to a long-term commitment. When your lease expires, you will be free to relocate.
• Maintenance. Landlords usually handle maintenance and repairs, which saves you time and money.
• Lower initial payments. Renting usually has a lower initial cost than buying a property.

Cons:

• No equity. Rent payments do not increase equity in the property. You will not benefit from any potential increase in property value.
• Limited control. You may have restrictions on customization or renovations, as you are living in a property you do not own.
• Rental fee increases. Landlords can raise rent, making the cost increase over time.
• No pets or children allowed. There are houses for rent that prohibit children or pets. If you own one or both, this is a disadvantage.

Renting is ideal for those who lean towards chargeability, whether for professional reasons, personal circumstances, or the desire to explore different neighborhoods before settling down.

Rent to own

Pros:

• Ownership. Rent-to-own agreements allow you to work towards homeownership while living on the property.
• Lock-in purchase price. Some agreements let you lock in a purchase price at the beginning, protecting you from potential increases in property value.
• Stability. Having a home of your own allows you to feel secure in the knowledge that you can stay there for however long you would like. If the time comes when you need or want to move somewhere else, you can even decide to sell it or rent it out.
• Investment. A house is an investment that may appreciate in value over time.

Cons:

• Higher costs. A rent-to-own framework often comes with higher monthly payments compared to traditional renting.
• Risk of non-ownership. If you fail to meet the terms of the agreement, you may lose the option to purchase the property as well as a significant portion of your previous payments, depending on the contract.
• Limited inventory. Rent-to-own properties may be limited in selection, as not all landlords or property developers offer this option.

Rent-to-own arrangements can be advantageous for individuals who aspire to own a home but require time to improve their credit score, save for a down payment, or stabilize their finances.

However, paying towards owning a home is a huge commitment, even without a big down payment. If you are planning to take on a rent-to-own scheme, here are some things you must make sure to do:

✓ Research and explore the neighborhood to make sure it’s safe, accessible, and accommodating to your lifestyle and needs.

✓ Compare and consider the total lifetime value of the property under a traditional financing scheme (percent down payment + monthly payments with financing interest rate x number of months) versus the total cost of a rent-to-own scheme (monthly payments x number of months). There is often a significant difference between the total costs of different payment schemes.

✓ Carefully review the terms of the agreement, including the purchase price, rent credits, and potential penalties for noncompliance.

✓ Ensure that the property is in good condition and free of any legal issues before signing a contract.

In the end, your financial readiness, long-term goals, and preferences will guide you to the right decision. If homeownership is important to you and you have the resources, purchasing a home outright may be the best option. However, if you prefer flexibility, a rent-to-own agreement may be a more viable option.

Looking for a home you can lease or rent-to-own?

Explore Nobleland properties in La Nobleza Terrazas Manila and The Exchange Regency Ortigas and check out our units for lease and for sale.