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Refinancing a Lease Option |
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What
is a lease option? |
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| This means you are leasing or
renting a property with an option to buy it at a future date. The
future price of the property should be fixed at the time the lease-option
is signed.
Sometimes there
is an up-front payment of some amount to purchase the option. The
amount can vary. Sometimes the monthly payment is larger than normal
and the excess is used to purchase the option. In some cases, the
option money can be applied toward the down payment for the later purchase
of the home.
Lease-options are usually done during a slow real estate market.
During a hot market, the seller can simply sell the home in the regular
manner.
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Why
buyers do a lease option. |
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They usually
cannot qualify for a purchase home loan and expect that they will be able
to qualify after a period of time. And during the lease period, they
can usually treat the home as if it were their own.
More importantly, they can more easily
qualify to purchase a home on which they have an option to buy. This is
because our lenders may treat it as a refinance after a period of good, provable
rental payments and use the equity buildup as their down payment. |
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What
benefits do a lease option hold for the seller? |
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- It enables them to sell the house without
the usual 6 percent Real Estate agent fees.
- Helps to sell the house during a slow
market.
- By being able to collect a larger
monthly payment than they could obtain in a normal lease, the property
"cash-flows" and they don't have to come up with money out
of their own pocket each month to make the mortgage payment.
- The seller gets option money up-front and
if the buyer does not exercise the option, they keep the money.
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