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The Advantages and Disadvantages of Buying a Lease Option

A Lease Option is technically a lease (rental) with the option to purchase. You are renting the home but have the right to purchase the home at anytime during the rental period at a pre-determined price. A lease option also can be a very favorable way to purchase a home because it provides the advantages of home ownership without the disadvantages of ownership.

The main advantages include: (1) No mortgage fees (2) less for a down payment

When structured property, there really are no disadvantages to a lease option relative to purchasing the home with a mortgage. When compared with renting, the major disadvantages of a lease option include: (1) pay more money upfront than renting (2) you are responsible for repairs, not the landlord. Each advantage and disadvantage will be discuss in greater detail below.


1. Advantage : No mortgage fees. This is because a lease option is technically a rental, the agreement is between you and the seller. Then it is also because of the bank is not involved, there are no bank fees, meaning that you don’t need to come up with the $5000 to $9000 that it costs to get a mortgage. However, eventually you will have to get a mortgage if you decide to stay in the home long term.

2. Advantage: Less for a down payment. Like the mortgage fees, because of the agreement is between you and the seller, the money down is negotiable, and sometimes not required at all, though the amount down typically ranges between $5000 and $10000 dollars. This is still better than the bank will require.

3. Disadvantage: Pay more money upfront. Typically a lease option requires a greater amount of money upfront than renting. This is not always the case and depends on how desperate the seller is the lease the home. Generally you can expect to pay twice what you normally would put as a deposit on a comparable rental.

4. Disadvantage: Responsible for repairs. One nice thing about renting is that the landlord is responsible for repairs. In a typical lease option, you are entirely responsible for maintenance of a home.
Finally, there are both advantages and disadvantages to buying a lease option. When compared with the buying the home with a mortgage, there is really no disadvantage. But when compared with renting, a lease option is a relative low risk investment for little additional out of pocket expense. The key is in the terms of the agreement between you and the landlord. The terms are negotiable, so make sure that you will do so. To summarize, a lease option can be a win/win situation for both buyer and seller. If you are looking for a home but don’t have enough for a regular down payment or are not sure if the market is going to get worse before better, you can consider a lease option and rest easy.

Source : ezinearticles