The Difference Between a Lease Option and Lease Purchase


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Both lease options and lease purchases are becoming more widespread. Understanding the difference between the two and knowledge of what they entail is key to knowing which will suit your needs.

We are first going to look at how a Lease Purchase is different from a Lease Option.

The terms Lease Option and Lease Purchase have mistakenly been used in place of each other although they in actuality are quite different.

For the tenant, a lease option is designed more in their favour. Allowing them to choose to purchase the property they live in if they so want and have first rights to buy it. The owner has to sell it to them if the tenant wishes and may not sell it to anyone else while under contract with said tenant.

A lease purchase in comparison is rather different. Here, the tenant must purchase the property prior to the end of the agreement. A lease purchase expects both parties to follow through on their end of the deal.

For those who cannot qualify for financing of a home, they usually use either a lease option of lease purchase.

Sellers will use either the Lease Option or the Lease Purchase in order to be released from their home when unable to sell it due to market conditions.

With a Lease Purchase, the benefit is obvious. The tenant-buyer is required to purchase the home at the end of the contract period. Psychologically, this is far more attractive for someone who would like to sell their home.

However, a Lease Option will offer more security to the seller although at first glance it does not appear to. A Lease Purchase gives the buyer or tenant an equitable interest in the property.

All this means, that if a seller fails to pay and does not follow through with the sale, the seller now has to apply for a judicial foreclosure and then the eviction. This time frame adds on many more months of the tenant living in the home without making any payment. The fear of this happening will often cause a seller to choose the Lease Option over the Lease Purchase.

The understanding of the difference between a lease option and lease purchase is of great consequence. As time and again, people tend to sign things that are beyond their intellectual capacity unless they have done their homework.

Comprehending the differences of a Lease Option verses a Lease Purchase is key to ensuring which structure will be proper for your situation and financial future.

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