What Are Lease Options?
Congratulations! You’ve made a big decision to consider buying a home. However, you may be encountering some obstacles or uncertainty about how exactly to get there.
Perhaps you’re currently in a position where you’re unable to qualify for a traditional mortgage:
- Recent divorce
- Bad credit history
- Self-employed
- Business owner
- Recent bankruptcy
- Pre-foreclosure
- New to Canada
- Relocation to new area
- Difficulties in financing
- Recent divorce
- Bad credit history
- Self-employed
- Business owner
- Recent bankruptcy
- Pre-foreclosure
- New to Canada
- Returning to Canada
- Relocation to new area
- Difficulties in financing
Or perhaps you and your family are simply tired of renting. Either way, you would like to own a home but may not know how to best get there. That’s where entering into a Lease Option Program may help you.
Commonly referred to as “rent-to-own”, a lease with the option to purchase (“lease option”) provides an option for you to purchase the home at the end of your lease.
This means you can enjoy the benefits of living in a home of your choice much sooner while having a plan to actively save for your down payment or build a positive credit history over a predetermined period of time.
These programs are designed to assist individuals and families who currently are unable to qualify for a traditional mortgage due to bruised credit, divorce, high requirements for self-employment, being newly immigrated or new to the area.
A home will be purchased for you at your choice in your desired market. A portion of your monthly payment will be accrued in a trust account, which will be credited back to you on your future purchase of the property.
Our Lease Option Program
Check out more information regarding Lotus Horizon’s Lease Option program here. Have questions? See our FAQs or contact us.
How It Works
A Lease Option Program can provide an alternate means to achieve home ownership: it gives you the opportunity to secure a home in advance while you work on mortgage requirements so you can qualify to purchase the home at a later date.
You agree to rent a home for a specified period of time – typically 2 to 4 years – before deciding to exercise your option to purchase the home at a pre-determined price on or before the expiry of your lease.
This simple and transparent structure has attracted thousands of individuals and families to join lease option programs to become successful home owners.
What is an Option Consideration?
You will need to contribute an Option Consideration amount to guarantee the ability to purchase the home at the end of the Lease Option Program. This amount will be credited towards your down payment requirement upon you exercising your option to purchase the property and qualifying for a mortgage.
An Option Consideration is the amount of money that you have to put towards the Lease Option Program once you have enrolled. This is typically around 10% of your future home purchase price. We typically request a minimum of $10,000 for your Initial Option Consideration, which is due at the start of the program. The remaining balance of the 10% option consideration will be due in equal monthly installments (together with the monthly rent) across the length of the program, which is referred to as your Monthly Option Consideration amount.
Example:
Future home purchase price: $180,000
Option Consideration: $18,000 (10% of future home purchase price)
Term: 3 years
Initial Contribution of Option Consideration (“Initial Option Consideration”): $10,000 (due at start of program)
Monthly rent: $1,500
Monthly Contribution of Option Consideration (“Monthly Option Consideration”): $222 (remaining $8,000 over 36 months)
Monthly Payment: $1,722 ($8,000 / 36 months + $1,500)
Your total contribution to the option consideration can be converted towards your down payment if you choose to purchase the home and qualify for a mortgage. Contributing a larger option consideration can help you save for a larger down payment, which would lower your future mortgage payments on the property once purchased.