A Lease Purchase is basically a contractual agreement between the seller of a property and the potential buyer. You would like to own the property, however you do not have the necessary budget right now, or you cannot have access to a loan only in six months for instance.
In such a case, the seller can offer you a Lease Purchase Agreement, which you are going to sign, and of course abide by its terms. But what does this document suppose and imply?
• You have to make an upfront deposit (usually of 3% to 5% maximum of the real market value of the property)
• After you sign this contract, you have the right to use the respective property (live in it), because the agreement works like a “rent” agreement between you and the seller
• Upon negotiation, you can settle with the seller what is the deadline for paying off in full the respective property (usually between 12 and 24 months, however this highly depends on the individual agreement, terms and conditions set by the seller, etc.)
• Basically the more you can afford to offer as upfront deposit, the less the amount of the loan you have to take, and of course the greater the chances that the home will be yours.
One very important note is that once you have offered the deposit (it does not matter whether 3% or 30%), if you back out from the contract, you lose the deposit. Therefore, you always need to carefully go through the contract details and the Lease Option regulations.
