Often, many people confuse lease purchase agreements with lease options. In reality, both are different in their own ways. It is necessary that people understand the difference between them and also they have to be aware of what they are actually choosing and which one is going to benefit them more.
Identifying both the terms as the same is being done by the real estate dealers too. In fact, they don't consider them to be synonyms. To understand how lease option differs from lease purchase agreement, we shall look into the following details regarding the same.
When you consider lease option, the tenant has more freedom than in the lease purchase agreement. Here, in lease option, the tenant can stay at the house while he pays some amount as initial deposit and also pays monthly rentals for the same. At the expiry of the lease period the tenant may choose to buy the property.
Remember, he "may" choose the house or he can just take his money back and walk away by the end of the term.
In case of lease purchase agreement, it requires that the tenant buys the property even before the lease period expires. It is something that makes the tenant to oblige to buy the property. Even when the tenant decides against buying the home, he cannot do so. But again, the agreement is a mutual one. It is going to be between the owner and the tenant. This again has room for changes to be made. Thus the owner can consider a similar strategy as that of the lease option and can customize the lease purchase agreement.
These options, lease option as well as lease purchase agreement, are meant for people who do not seem to qualify for mortgage, yet desire to own a house for themselves. Lease purchase agreements favour the owners more than the tenants. Though people claim that they favour both the parties equally, there is a fact that the tenant is obliged to buy the property at the end of the term. This means that the system is not flexible for a tenant.
In case of lease option, the tenant can always take back his money that he paid as an initial deposit and move away without having to buy the property. There is no hard and fast rule that he should be purchasing the house. So this scheme seems to favour the tenant and not the owner.
While we say this, both are advantageous in their own ways. Hence it is up to the owner and the tenant to choose the best among the two.