A lease purchase (AKA lease option, rent to own, lease to own, etc.) is a rental or lease AND a purchase agreement (combined or separated) between a tenant/buyer and a landlord/seller where the tenant/buyer has the choice, option or right to buy the property, or control certain terms of the agreement while the property is being rented.
It’s a great option for first-time home buyers who don’t have a down payment or established credit history, or investors looking to lock in a price. If you’re considering a lease purchase, consider the following:
|Try before you buy – get the home you really want||Risk of losing money if you back out of the deal|
|Smaller down payment – time to save more significant down payment at time of purchase||Unethical landowners may be quick to take possession if a payment is late|
|Home price locked in for a set period at the time of signing – good if property values increase||Home price locked in for a set period at the time of signing – bad if property values decrease|
|Seller pays for maintenance while the buyer pays the lease. Seller also pays for property tax, insurance and repairs until buyer purchases the property.||Seller retains mortgage interest tax deduction.|