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Lease glossary

Rent-to-own

Rent-to-own is an arrangement in which a tenant rents a home with the option, or the obligation, to buy it later, usually at a price set at the start. Part of each month’s payment, called a rent credit, may go toward the down payment.

Also called lease option · lease-to-own · lease-purchase

Example

A tenant pays a $7,500 option fee and $2,000 a month, of which $300 is a rent credit, with the right to buy the house for $250,000 within three years. If they buy at the end of year three, $7,500 + 36 × $300 = $18,300 counts toward the purchase. If they walk away, or cannot get a mortgage in time, the option fee and the credits are usually lost.

In a lease option it looks like…

In consideration of the option fee of $7,500, Landlord grants Tenant the option to purchase the property for $250,000 at any time before September 30, 2029. $300 of each monthly rent payment made on time shall be credited toward the purchase price.

Good to know

A lease option lets the tenant decide; a lease-purchase commits them to buy. Have a real-estate attorney read either one, check who pays for repairs and property taxes during the rental years, and confirm the seller’s mortgage is current.

Plain English, not legal advice. Last reviewed September 29, 2026.