2 Answers

A lease-to-own house purchase (also “rent-to-own purchase or “lease purchase”) is a lease combined with an option to purchase the property within a specified period, usually 3 years or less, at an agreed-upon price.  The borrower pays an option fee, 1% to 5% of the price, which is credited to the purchase price.  The borrower pays rent, and an additional rent premium that is also credited to the purchase price.  If the purchase option is not exercised, the buyer loses both the option fee and the rent premium.

Typically this happens when a buyer does not have enough money for the down payment today or is just starting out his career after college, and is not totally sure if this is the neighborhood he'd want to be in permanently.  The Landlord has the motivation to sell but realizes that the market is not good as before, yet does not want to drop the sales price.  He gets a tenant to pay rent, takes presumably good care of his house, and gets a little extra money on top of the monthly rents.  This may be a win/win situation for both parties.

how does lease to own work?