Love It and Lease It: Rent-to-Own Luxury Homes

For potential jumbo-mortgage borrowers, a lease option gives future buyers the opportunity to save for a higher down payment or get a credit history in order, while locking in on their future purchase, says Linda Rheinberger, a broker with Berkshire Hathaway HomeServices in Las Vegas. On their end, sellers typically agree to a lease option as a way to cover their mortgage payments or make additional income until the sales market improves, Ms. Rheinberger adds. Here’s how it works: In most cases, renters agree to a lease option that allows them to either buy or walk away from the property at the end of the rental term, usually two years, says Steve Goddard, a manager with Re/MAX Estate Properties in Manhattan Beach, Calif. They pay a deposit, or “option consideration,” usually no more than 2% to 2.5% of the home’s market value, he adds. The deposit will be credited toward the down payment if the home is purchased. If the renter decides not to buy, the seller keeps the deposit, Mr. Goddard says.

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