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home lease purchase or ‘lease with option to purchase’ is a contract with a combination of conventional rental agreement and a limited option to purchase the house at a predetermined future date. The contract of a home lease purchase become effective when you the buyer wish to buy a house but your credit condition does not make you suitable for a regular/conventional mortgage, FHA or VA financing, etc.
The real implication of a home lease purchase is that as a prospective buyer/tenant you agree to a lease period with your landowner at the end of which you can purchase the property in question at a price fixed before the commencement of the contract of the home lease purchase. However, first, you must pay the landowner an option deposit (option money) for the right to buy the house, which is non-refundable.
In addition to this, you are required to pay the landlord a monthly rental amount, a part of which can be used for the purchase price of your property. However, this amount is normally used for the mortgage amount that the landowner is bearing. Just in case you cannot purchase the house at the end of the home lease purchase contract, you can negotiate with the landlord for executing a couple of options.
You could either mutually agree over the extension of the option period to 36 months, transform the home lease purchase contract into a conventional rental agreement or end the home lease purchase contract where you agree to abandon the house and the landowner is free to lease it to other buyers or tenants. Hence, you can see how a home lease purchase can be advantageous than a home lease alone by being a bilateral contract.
The many positive points of home lease purchase
* Under the
home lease purchase scheme, you could start with a brand new expensive house with a down payment of only $3,500 that is far lower than mortgage rates.
* With the home lease purchase, you can move in your dream house as you make the first payment, without waiting for months to clear the complicated paperwork.
* A home lease purchase allows you considerable time to take up a loan for gathering funds for your down payment. You could be at your ease while building up a perfect payment history during the home lease purchase period.
* Within the home lease purchase, you can get a part of the monthly lease payment at the end of the contract and build equity by accumulating rent credits
* Additionally, you get the entire amount of the home lease purchase down payment at its end.
* A home lease purchase does not require strict credit qualifications as a normal financing system and keeps you away from credit problems.
* You can even do home improvements since the home lease purchase ensures that all the benefits remain exclusively yours-just make sure it is in your contract.
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Home Lease Purchase
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