What is a Lease Option?

A lease option (or lease purchase) is the abbreviated form of the appropriate term lease with option to purchase. It is a type of contract used in residential real estate. The contract is typically between two parties: the tenant (also called the lessee), who will occupy a house or apartment, and the landlord (lessor), who owns the property.

During the term of the lease option, the tenant pays credit to the landlord toward the value of the property, and in exchange is permitted to occupy the property. At the end of the contract, the tenant has the option to purchase the property outright; the tenant would typically obtain the money to do this using a mortgage.

Excess credit may also be applied towards the eventual purchase of the property, or towards the down payment for a mortgage. In that case, the lease option works as an automatic savings plan for the tenant.

Lease options are often used by tenants with a poor or limited credit history, who would not qualify for a typical mortgage. The lease option may carry less risk for the landlord than a mortgage would for the lender. The lease option may also require less money up front, while a mortgage might require a substantial down payment from the tenant. To find out if a Lease Option is right for you, please contact us!