What does Rent-To-Own really mean?

source: 801agent.net

Who would think that a term that is self-explanatory could be so confusing?

Rent-To-Own (RTO), as the name suggests, is essentially an arrangement wherein the seller gives the buyer the right to buy a (rented) house at some point in the future at a price agreed upon at present time.

The most common misconception is that Rent-To-Own (RTO) houses are cheaper. This is not always the case as the price would still depend on the size, location, and value of the property. 

Perhaps the confusion stems from the notion that the rent price is normally cheaper than the monthly amortization of a brand new house. Again, it's a case to case basis. 

The idea of eventually buying a rented house gives the buyer ample time to evaluate the house and the neighborhood without committing to a long term mortgage. Let's face it, structural and design flaws only become apparent after several months or years. So, RTO arrangement has its merits.

Unfortunately, some brokers and agents used the term Rent-To-Own even if what they mean is amortized downpayment. 

To simplify it, RTO just means trying it before committing. So if your broker says you can't move in yet until you complete the downpayment, most likely, it is not a Rent-To-Own arrangement.