Higher Interest Rates Make Rent-to-own Right, Right Now

Rising interest rates are putting more and more aspiring homeowners between a rock and a hard place. When you can’t afford a mortgage for your dream home, you can compromise on a lesser house (if it even exists in your area). Or keep renting, forgo equity, and cross your fingers that things will change. 

Or you can take the third option: a stepping stone between renting and a traditional mortgage that makes your dream home accessible now.

Divvy does just that with lower upfront costs and monthly payments, pre-set purchase prices, and the option for built-in down payment savings that can grow alongside your home’s appreciation. From day one, we plan for every customer to own their home, all while giving them the freedom to walk away at any point, sacrificing just a 2% relisting fee. 

Benefit from appreciation

The unprecedented demand for single-family homes during the pandemic caused a lightning-fast average appreciation of nearly 45% in just two years. While that growth rate is likely to slow, housing inventory is still a fraction of what’s needed, and we expect homes to continue to increase in value over time. Not only does waiting on the sidelines mean continuing to put life on hold—it also isn’t likely to be the wisest long term wealth strategy.

Divvy customers don’t have to wait to build wealth. When you save for your down payment with Divvy, those savings can grow annually based on the appreciation of your home, jumpstarting your equity. And with pre-set purchase prices that don’t change no matter how much your home value increases, you have the potential to beat the market altogether. 

If that doesn’t happen, and housing prices come down? You can walk away, no questions asked. Divvy customers have three years to watch the market while deciding whether to buy their homes. If the tide turns against them, they sacrifice only a relisting fee of 2% of their home’s initial price.

Spend less today—and maybe tomorrow, too

The New York Times recently reported that today’s higher interest rates will increase mortgage payments by hundreds of dollars a month, possibly adding $100,000 in costs over the lifetime of a typical loan. Worse still, most analysts believe interest rates will continue to rise in the immediate future. 

But across the three years of a Divvy lease, the story could be very different. While their equity grows, today’s Divvy customers might avoid getting stuck with peak interest rates, instead timing their mortgages for more favorable terms.

Long term costs aren’t the only concern, though. High cost of living is affecting every American, which means every dollar matters right now. When nest eggs are more precious, Divvy’s initial payment of just 1-2% down—with no initial closing costs—means our customers hold onto more of their cash savings at move-in. And because our customers aren’t saddled with interest, insurance and taxes, their monthly payments are lower than with a traditional mortgage, too.

The bottom line 

As our CEO Adena Hefets recently put it on Fox Business, “the more expensive mortgages are, the greater the population of Americans who get locked out.” We believe there’s a better way, and that everyone deserves a chance to build their own future—from inside their dream home.  

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