To me, this just seems like a way to take advantage of people. What if you pay you house payment every month for years, then get laid off. You can't make the payment and get evicted. If you had taken a mortgate, you could sell the house and recover your equity. If you're doing rent-to-own, you're out on the street with nothing. Companies that do this with appliances actually try to get people to default because they can go rent the appliance to someone else. It's a little like a bait-and-switch.

Reply to this note

Please Login to reply.

Discussion

One thing that used to be common and is more fair is owner financing. You buy the house and pay the previous owner as if it were a mortgage. It's not very common now because most people need to get the full price for the house to pay off their mortgage.

Houses will tend to decline in nominal terms, under a Bitcoin standard. All assets do. You'd almost always be underwater on a mortagage.

Rent-to-own is unattractive for landlords, when house prices rise, because it's easier to find a renter to pay more. Under asset-price deflation, the next renter would pay less.

I agree that rent-to-own is silly when goods and asset prices rise, interest rates are low, and debt is easy to discharge.

Under the gold standard, the value of a house declined over time due to depreciation. In those conditions, it was uncommon to see home loans with terms longer than 5 years. This prevented people from being underwater for the most part.

Home loans were generally uncommon.

Rent-to-own contracts could just include a cancellation fee paid by whoever ends the contract early.

If you're the one renting, you still end up with nothing in this scenario, plus having to pay the fee. If it's a mortgage, the house gets sold off and you get whatever is left after the bank gets paid.