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Advantage Of Lease Purchase

Lease to own is way to purchase a home thru a lease. The buyer lease the home until the buyer decides to purchase the home. Within the lease agreement, the buyer finally purchases the home.

The buyer can choose between lease purchase or lease options. The buyer will absolutely purchase the home with lease purchase, while the buyer may decide to purchase the home with lease option. Here are list of advantages to the buyer and seller of the home.

Purchase home with bad credit history

The financial institution uses the credit score to see the ability for the buyer to afford the mortgage repayment. Any score above 660 places the buyer on good credit history. Sometimes, the debt gets a little out of hand. And, the buyer goes under bad credit score.

Lease purchase allows the buyer to catch up with the credit score. The duration of lease agreement gives the buyer time to repair bad credit rating. Usually, the lease agreement spans between one and three year. So, the buyer has one to three years to repair bad credit rating.

Locks the home price

The seller and buyer agree on the price of home. When the buyer is ready to make the purchase of the home, the buyer applies for mortgage financing with the agreed price of the home. If the home increases in value, the buyers can resale the home at a higher price.

Equity starts to grow sooner

If the buyer waits to purchase a home, the home may increase in value. The value of the home may increase in such a way that the home is unaffordable to purchase the home. As the buyer locks the home price, the buyer gains home equity right away. By the time of purchase, the home must have increase in value. Thereby, the buyer gains home equity.

Try before the actual purchase

The buyer can give the home a try. The buyer can know any defects for the home while the buyer is on a lease. If the buyer is comfortable with the location, and home, the buyer may go ahead to purchase the home.

None or little mortgage closing costs

The lease includes the lease and premium. The premium is added at the time of purchase. And, the premium is used as credit to purchase the home. The premium may be large enough to pay off the down payment and closing costs to finance the mortgage.

Costs less to maintain

The seller pays for the maintenance of the property while the buyer pays the lease. The seller pays for property tax, insurance, and repairs. After the buyer actually purchases the home, the buyer starts to pay the property tax, insurance, and repairs.

Tax deduction

The seller still owns the home while the buyer still paying the lease. The seller can claim the mortgage interest. The mortgage interest tax deduction is useful way to reduce tax each year. A big portion of the mortgage payment is mortgage interest. The mortgage interest is at the biggest at the start of mortgage. The mortgage interest gets smaller over time.

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Information and calculation provided on this mortgage calculators website is for general purposes only. It is not intended to take the place of advice from your mortgage brokers.