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All You Need to Know Before Buying a Lease-To-Own Home

January 10th, 2011

You want to buy a house but you don’t have enough to make the down payment or your credit score is not good enough to apply for a favorable mortgage. Before you resign yourself to being a renter all your life, think about the lease to own approach to finally having your own home. It goes by other names. Sometimes this type of purchasing agreement is called rent to own, lease to buy, or more commonly lease option. The basic idea is fairly simple. You lease a house and make monthly payments like a regular rent arrangement but this time at the end of the lease term, you can purchase and own the house. It’s a good way to buy yourself some time to save more money and improve your credit while already occupying the place that could turn out to be your permanent address. Naturally there are several other details you need to know about this approach.


The option money or fee is the very first and probably most important aspect you have to consider. This amount is paid upfront and goes to the purchase price. Sometimes it could be equal to two or more month’s rent or in other cases a small percentage of the purchase price. It can seem like a security deposit, especially when the lease to buy agreement you’ve entered requires you to pay it initially. However there is one major critical difference. Unlike the security deposit which is returned to you when you conclude your lease, the option fee cannot be redeemed. Monthly payments in a lease to own arrangement are generally higher than regular rent because the option money is also added to it.


Prospective buyers use the lease option way of purchasing a house as a way of locking in the price of the property. Because the purchase price has already been agreed upon, any general or local increase in real property value won’t affect the rent to own house. But the ‘locking-in’ goes both ways. Yes, you have the option to not buy the house but are you really just going to flush away all that monthly option money you’ve been paying for two or three years. The use of the term ‘option’ can be misleading. You have to be pretty sure you’re going to buy the house at the end of the lease term before you actually enter into any agreement with the owner.


Check out the neighborhood and test the plumbing. When you’re satisfied and decided about buying the house, start making plans to ensure you actually have the capacity to do so. Building a history of prompt payments on your lease to own home is a good way to improve your credit. You’ll also need to apply for the loan early, at least 2 months before the lease ends, so that the mortgage is ready by that time. Take note that some lending institutions offer refinancing plans for lease options. Such plans are generally easier to apply for and quicker to process than new mortgages.

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Realty Express Inc. is Canada’s quick and reliable housing solution provider. Issues with down payments and bad credit are just a 24 hour assignment for them. Whether you’re buying or selling, this family business provides services for both sides of the market. Visit www.realtyexpressinc.ca and find the housing solution you need.