Lease-to-own agreements are blowing up - The Hustle
The Hustle

Lease-to-own agreements are blowing up

The model offers an alternative to traditional homeownership, but it has some downsides.

In the next Mission: Impossible movie, Ethan Hunt should try buying a house.

Home prices rose faster than ever in 2021, mortgage rates are the highest they’ve been since 2008, and limited supply means buyers are scrambling for whatever they can get.

But an alternative option that gives buyers another path to homeownership is gaining steam, per Protocol.

Lease-to-own…

… is a model that allows customers to make a monthly lease payment, with a portion of it going toward owning the property.

The movement is powered by fintech startups like Divvy, Verbhouse, and ZeroDown, which buy homes in cash and rent them to customers using lease-to-own agreements.

Here’s how it works

With Divvy, a typical agreement:

Divvy’s program is designed for renters to become “mortgage-eligible in three years,” according to the company’s website.

But rent-to-own agreements are controversial

They have a history of being predatory and targeting low-income Black and brown homebuyers.

Critics point out other downsides as well:

For its part, Divvy says roughly half of its customers are able to buy their homes. But the market likely wouldn’t be as competitive if these companies weren’t scooping up homes in the first place.

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