Rent to Own vs. Lease to Own vs. Lease Purchase
November 9, 2015 by Marty Orefice |
We refer to Rent to Own agreements a number of ways on our website.
Rent to Own and Lease to Own
The first alternative term is Lease to Own. You can use this term interchangeably with Rent to Own. The word “rent” and “lease” both indicate you’re in a rental agreement, and “to own” indicates you have the right to purchase the property (known as a Lease Option), in addition to the rental agreement. Lease option means you have the option to purchase the home at the end of the lease. If you choose not to, you forfeit the option fee and any premiums you’ve paid, but you are free to walk away without purchasing. This is the best option for people who are unsure of whether they will qualify for a mortgage in the next few years.
Additionally, you may have also heard the term Lease Purchase. A lease purchase is different from a Lease Option. Instead of an option to buy, it’s an obligation. Check your credit score and finances before signing a lease option. Find out what types of credit scores lenders are approving. Can you raise your credit score that much in the next few years? Figure out how much of a down payment you will need to put down. Make sure that you will qualify for a mortgage at the end of the lease because otherwise, you might be in legal trouble with the seller.
Gray House with Fireplace Surrounded by Grass Under White and Gray Cloudy Sky by Sebastian Soerenson is licensed under the Pexels Photo License.