Lease Purchase
Lease Purchase – Baby Steps Toward the Bigger Goal
By Buyincomeproperty.com
Nov 10, 2005, 23:05

A lease purchase agreement may be the answer to your property buying needs. There are some definite pros to a lease purchase agreement and time may be one of the biggest.

If you’re ready to buy your first home or to move up to your next home, the lease purchase agreement may be a short-term solution to the immediate cash flow problems. Consider how a lease purchase could help you.

For the young couple just starting out, saving enough money for a down payment may not be an easy task while you’re paying rent. A lease purchase agreement may be the answer. You enter the process almost on the same terms as a renter, except that you’ve agreed to a longer-term relationship and the property owner has promised that you can continue living in the home as long as you conform to the financial agreement.

If you can find someone willing to make this kind of lease purchase agreement, you can have the security of a home of your own without waiting until you manage to save enough for the down payment you need.

In this case, you may qualify for a loan when you have built enough equity in the house (when the value of the house is significantly more than you need to borrow in order to pay the remaining debt on the lease purchase).

Another case that lease purchase agreements can benefit the buyer is when poor credit history has damaged your ability to get a loan. If you’re recovering from bankruptcy or simply trying to rebuild your credit after allowing it to fall, you may find that you just can’t get a loan. Even if you have a sizable down payment, you may not find a lender who’ll back you. A private individual who is willing to enter a lease purchase agreement may be more willing to overlook your past credit history.

Remember that you’re entering into a legal contract when you take on a lease purchase. If you fail to meet the terms of the lease purchase contract, you’re subject to legal proceedings, and to losing the property. That means that you may have made the payments for some period of time, only to have the lease revoked and the property repossessed if you don’t make payments. Be careful not only to make payments on time every time, but that the contract doesn’t give the owner any unreasonable rights (the ability to evict if the payment is 24 hours late, for example).

In this case, you may find that you qualify for a loan at some future date, and that you can take out a loan to pay off the lease purchase agreement at that point.

If you’re simply experiencing a temporary cash flow problem, a lease purchase agreement may be the answer. For example, if you’re selling your home and looking to purchase something larger, you may be wearing yourself out trying to coordinate the sell date of your house with the purchase date of the new house. You may not be able to put a down payment on the new house until the other sale is complete. A lease purchase agreement on your new house may give you time to bring all the ends together. Just remember that you’re obligated to keep up payments on yoru lease purchase, even if the old house doesn’t sell quickly (or at all).