closing costs

Do you have to pay closing costs when renting-to-own a home?

A common question asked by would-be homeowners going through, or just beginning, the rent-to-own process is whether or not they will be required to pay the closing costs of the home once the rent-to-own agreement has reached its pre-agreed upon lifespan.

Benefits of Renting-to-own

One of the benefits of renting-to-own is that there are no closing costs in this type of transaction.  This is a benefit to both the buyer and the seller and removes another thing to negotiate over when drafting contracts.   The biggest benefits to buyers tend to be the lack of closing costs and the fact that (in general) a buyer isn’t required to pay a down payment.   However other fees and interests may apply so it is important to educate yourself on what may be included in the rent-to-own agreement.

Consider Escrow Fees

While you get the benefits of no closing costs or down payments, one of the drawbacks is potential escrow fees.  Escrow fees include costs of paperwork that must be filed when you agree to a rent to own purchase.   However, escrow fees are generally required in a traditional home purchase as well, so this is similar to fees that may be part of a common home-purchase agreement.  While negotiating the rent-to-own contract, you may be able to get the owner to pay escrow fees depending on what you are willing to give up or pay more on in return.


Like most large purchases, you will want to consider additional fees like interest.  You may pay a little more in interest or filing fees over the years.  However, when you take into account what you are saving, and the benefits of renting to own, you may find out that this comes out in your favor in the end.

In conclusion, if you are looking at buying a home but factors outside of your immediate control have prevented you from doing so, you might find that a rent-to-own option is a great opportunity to move into a home you love, and one day purchase that home.   Common issues preventing people from obtaining a traditional mortgage include credit issues or financial issues that make it difficult to save up for the larger down payments a traditional mortgage would require.   As with any big agreement, make sure you thoroughly research the opportunity, ask the right questions, and get all of your paperwork reviewed by a lawyer.