Leasing Your Home
Leasing a property can work well for you. If you are wondering if a leasing arrangement is right for your situation, here is a brief explanation of two leasing techniques to consider as you decide.
Lease-Option
This arrangement is sometimes referred to as a “lease with the option to buy.” It provides you as a future buyer with the opportunity to rent a property for a specified period of time – typically a year or more – before you exercise the option to complete the purchase. During the leasing period, a portion of the rent is credited toward building a down payment. In most cases, tenants also pay a non-refundable sum of money up front as consideration for the option to buy later. If the you choose to buy at the end of the leasing period, you would get a mortgage, exercise the option, and buy the property.
Lease Purchase
The lease-purchase works the same as a lease-option in regard to a rental period, rent credited toward future purchase, and up-front consideration. Also, in both cases, the purchase price and terms are set at the outset of the leasing arrangement; and the seller is obligated to sell at that price and on those terms. The important difference is what happens at the end of the lease period. With the lease-option, you have the option, not the obligation, to buy the property when the leasing period is up. But with the lease-purchase arrangement, you have a definite purchase agreement stating that you will buy the property for a certain price and terms by a certain date.
Leasing can be a good way for buyers who can afford the monthly payments, but not the down payment, to live in their desired home while working toward future purchase. Or buyers with less than spotless credit can use this purchase method to move into a home and improve their credit rating over time so that they can qualify for a loan with more desirable terms.
Related posts:
