Differences between a lease purchase and rent to own
If you want to enter the real estate market, but for now do not qualify for a traditional mortgage, a lease with option to purchase or a lease-purchase can be a way of owning a home. However, although these two terms are often used interchangeably, you must understand their differences to protect against improvistos.
The biggest difference between a lease with option to buy and one lease purchase, difference is that in the latter, the landlord and tenant enter into a contractual relationship that requires the tenant to purchase the home at the end of the lease . The phrase “rent to own” could be used interchangeably with the phrase “lease option”, which could clarify the difference. In a situation of rent to own or lease purchase, the lessee has the option to purchase the property at any time during the rental period. In general, both circumstances require the tenant makes a down payment at the beginning of the rental and then pay a certain amount above the amount of monthly rent, which is payable at the time of initial purchase payment.
Abandoning the agreement
To leave a lease to own or lease purchase, a tenant must give up your down payment and extra money paid in monthly rent. However, on a lease-purchase agreement, if the tenant decides not to buy the house, you have not fulfilled their part of the contract and could face legal consequences. The contract is a legally binding document in which the lessor to the lessee agrees to sell the house at a fixed price, and instead, the lessee agrees to purchase the home at the end of the lease . Breaching that contract means that the landlord may incur additional charges.
Because of legal differences between these two types of contracts, the level of preparation may differ slightly before making an agreement. In both cases, you should go with a real estate attorney to make sure both parties are clear about the terms of the agreement, and to create a strategy out. You should also contact a real estate agent to determine whether you will be able to absorb the mortgage at the end of the rental period. However, on a lease-purchase agreement is slightly more important that you make an inspection of the house and you hire a title company immediately. If you discover problems several months after signing the contract, end up with a much bigger problem than you’d have in a lease to own.