Lease Option


Lease Option, also known as lease to own, is an alternative method of home financing by way of a lease arrangement that provides the customer the option to purchase the property through rent-to-own homes concept.

Lease option is different with lease purchase. Lease purchase binds both seller and buyer to the sale while the buyer has the right but no obligation to buy the property in a lease option.

In a conventional home purchase, an offer is accepted, the buyer and seller meet to exchange funds and settle final costs, and, at the close of the transaction, the property, and its title change hands. Typically, buyers will apply a loan from the bank to finance the purchase.

But sometimes, there is an alternative way to buy a home: a lease option agreement, also called a rent-to-own or a lease-to-own agreement. When buyers sign this kind of contract, they agree to rent the home for a set amount of time before exercising an option to purchase the property when or before the lease expires.

In a lease option agreement, potential buyers get to move into a house right away. The tenants typically rent the property for a set amount of time (usually three to five years), after which the tenants can purchase the house from the seller. It’s not as simple as paying rent for three years and then buying the house, though. Certain terms and conditions must be met, in accordance with the contract.

Rent-to-own homes concept is specially designed to assist those who have difficulties in attaining home ownership due to the high initial cost especially for the first-time home buyer. The key benefits of lease option as compared to the normal renting arrangement are:

  1. Transparency – certainty of your rentals throughout the tenure;
  2. Wealth creation – opportunity for earning capital appreciation on your property;
  3. Option to Purchase the property at pre-determined price; and
  4. Able to convert the monthly rent payment as the down payment on a house.