What is a “Lease to Buy” and Should You “Lease To Own” or Purchase?

The recession is hitting everyone hard where it hurts the most - our wallets. People are struggling with mortgages, credit card debts, car payments and even the weekly grocery shopping, so it is no surprise that new ideas are springing up all over America to make saving money a little easier. Short Hills New Jersey Real Estate is no exception.

Getting your foot on the property ladder can be harder than ever these days, especially for first time buyers or young people. "Lease to Buy" or " Rent to Own" options are a great option for making the transition from tenant to fully-fledged home owner. Real Estate in NJ is highly sought after, and homes for sale in New Jersey can be expensive, making them hard for people to buy outright immediately.

A "Lease to Buy" 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, generally within the year, at a certain pre-determined price, that the Buyer/Renter and Seller/Landlord agreed upon.

The Buyer/Renter usually pays an option fee, 1% to 5% of the price, which is credited to the purchase price. He also pays rent with an additional rent premium that is also credited to the purchase price. (For example: on a $500,000 house the option fee may be $10,000 at 2% and assuming the base rent was set at $3200 + $500 as a premium). All those numbers are for illustrational purposes only.

It is extremely important to for the Buyer/Renter to understand that if the purchase option is not exercised, the buyer loses both the option fee and the rent premium.

Although it does not look like a favorable way to go for the Buyer/Renter there are some advantages to contracting this particular way. Here are some of them:

• Building an equity (possibly restoring your credit) while living in the house.

• Buyer/Renter can assign his purchase option in case he realizes he will not be able to exercise it.

To the Seller/Landlord, however, the monthly payments are the best guarantee that his house will sell and if Buyer/Renter fails to exercise his purchase option, the monthly payments as well as the option fee are retained as income.

"Lease to Buy" can be a win-win situation for all parties involved, but I would strongly suggest consulting your favorite Real Estate professional for an advice and help with preparing a contract, so that everybody involved will benefit. Going into any major agreement like home buying is always safer with professionals, and your real estate agent can ensure you’re not ripped off or left high, dry and broke. The best place to buy or sell homes online is Short Hills New Jersey Real Estate. They have listings of homes for sale and wide range of New Jersey Real Estate, guiding you through the home buying process, making choosing your home a lot safer and easier, enabling you to quickly expand your horizons.

However, purchasing a property outright in Short Hills, or anywhere in New Jersey for that matter, isn’t as easy for everyone, and specifying that you’re looking for "Lease to Buy" is often the best option if you’re struggling financially or looking to ‘test the waters’ in an area before you buy outright. "Lease to Buy" is a way (for example) of ensuring you get yourself a home at an earlier stage than you’d ordinarily be able to afford, reducing your stresses and getting you out of your parents’ home when you want to, rather than when you can, making it an extremely sensible and appealing option overall - if not entirely ideal.