Tenancy agreement with option to buy: is it worth it?

Currently, due to the unstable situation we live in, aggravated by inflation, those who want to buy a house are faced with many doubts and don´t know if they are making the best decision. On the one hand, there´s the difficulty in saving up to apply for a mortgage, and on the other, the uncertainty of employment, in addition to the high prices of houses for sale. Often, renting ends up being the best solution.

And is renting the only possibility?
The truth is that there are other possibilities. One of them is the lease with purchase option. This option differs in some aspects from the traditional rental contract since the monthly rent you pay is deducted from the total value of the property. To better clarify this type of contract, here are some characteristics you should know about:

• It is a mixed contract, since it brings together two types of business, the lease and the sale of a house;
• The lease period and the conditions must be established in the contract;
• It is up to the tenant to decide if he wants to purchase at the end of the lease;
• If the landlord wants to sell during the term of the lease, he must give priority to the tenant.
• The total or partial amount paid for the rents may be deducted from the purchase price, depending on what was initially agreed in the contract.

Lease agreement with option to purchase: is it worth it?

A lease contract can be a good option for those who want to buy a house without resorting to a mortgage in a primary phase, allowing them to follow the interest rate oscillations and choose the moment that gathers the most favourable conditions. Besides, there are other aspects to be taken into account:

• It allows us to buy the house at a stage when mortgage conditions are more appealing;
• While renting, we can save money;
• If something unexpected happens, we can always cancel the contract, with a previous warning;
• It allows us to get to know the house, the neighbourhood and the area better before buying it;
• At the end of the contract there is no obligation to buy the property.
• Is it a good deal for the owner?
• This type of contract is not only advantageous for the tenant, but also for the owner who can guarantee the occupation of the property and its permanent maintenance/care and at the end, can sell the property, guaranteeing a fixed monthly income until the deal is closed. In short, a lease with purchase option also has advantages for the owner:
• Allows the property not to be unoccupied and deteriorating due to lack of use;
• Increases the possibility of selling your home;
• You will earn the rent during the rental period.

What are the risks of the lease with purchase option?

However, as in almost all cases, there are advantages and disadvantages. In this specific case of the lease with purchase option there are risks that should also be taken into account:

• The landlord may have debts and the house may be seized and therefore the sale will not take place;
• If the tenant has given a deposit for the future purchase of the house, this value may be lost if the property is not bought;
• Due to the constant changes in the real estate market, the owner may not be able to sell his house at a current and higher price, since the sale clauses were defined at the beginning of the lease.