Important Features of A Lease Purchase Contract
The Lease Purchase is also known as the rent- to-own option. Buyers simply enter a contractual agreement with the seller, and they will pay the monthly scheduled “rent” or “lease” up until they are able to pay off in full the property, when the term of the contract is up. Usually, such contracts have a term of 12 or 24 months, rarely more.
For the buyer, the longer the term of the contract, the more advantageous this whole venture for him is:
- He has the necessary time to gather the necessary money required for the final payment
- He knows that with every lease rate that he pays towards the seller, he owns another little piece of the home. Unlike when he is paying rent for 10 and 20 years, and still not own anything.
- However, if he does not manage to abide by the rules and regulations stated within the Lease Purchase Agreement - for example, the time is up and the buyer cannot pay off the remaining amount- then, he loses the initial down payment (3%, 5%, or 10% from the total value of the property).
- So it is highly advisable, that once you choose a Lease Option, you act with utmost responsibility and make sure you can pay off your purchase when the deadline is up. If you simply cannot offer the amount, and the deadline is getting close, you should definitely talk to the seller about an extension of the term of the contract.
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