What is lease purchase?
Lease purchase, also known as rent to own or lease to own, offers an alternative to conventional purchase for people who do not qualify for a mortgage.
The tenant has the option to purchase the property at the end of a predetermined lease period, which is usually 2 to 5 years.
During this period, the tenant pays a higher monthly rent than a traditional rent, a portion of which is credited towards the purchase of the property.
To enter into a lease-purchase agreement, both parties sign a contract.
The agreement details the terms and conditions, including the length of the lease, the amount of rent, the portion that will be credited towards the purchase, the purchase price of the property at the end of the agreement, and the responsibilities of the parties.
The tenant also pays an initial amount, usually between 13 and 15%, which serves as a down payment and includes the costs of setting up the contract.
At the end of the lease term, the tenant may purchase the property using the down payment and a predetermined portion of the rent as a down payment.
This option allows individuals who have difficulty obtaining a mortgage to access home ownership while providing time to improve their financial situation and credit record.
Lease-purchase can have disadvantages such as a higher monthly rent than a traditional rent, the risk of losing a significant part of the down payment or additional rents, in case the tenant does not buy, at the end of the contract.
In addition, unfavorable changes in real estate market conditions during the lease period may impact the possibility of financing at the end of the lease-purchase contract.
It is important to understand the pros and cons of this option to determine with a mortgage broker if a lease purchase is the best option for you.
It is essential to ensure that all aspects of the contract are clear and that you are comfortable with the terms and conditions before you sign the contract. Lease purchase can be a gateway to achieving your dream of home ownership while giving you the flexibility and time to improve your financial situation and prepare for your future.
Contact us to find out the details of a lease purchase agreement for your future property.
