How Do Lease Purchase Agreements Work?

how does a lease agreement work

Lease purchase is an alternative way to buy a home.

Identification

A lease to purchase agreement is a home rental lease that includes an option for the renter to purchase the home during the term of the lease contract. The contract specifies the purchase price of the home, and in exchange for the purchase option, the renter pays an upfront deposit. The lease portion of the agreement will last one to three years, and the renter can exercise the option to purchase anytime during the lease. During the lease period, the renter has exclusive rights to purchase the home, and it cannot be sold to another party.

Function

In most lease purchase contracts, a portion of each rental payment is credited toward the home purchase. The accrued rental credits plus the initial

deposit will be a partial down payment on the home if the renter exercises the purchase option. If the renter decides not to purchase the home, this money is forfeited and kept by the homeowner.

Potential

Considerations

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