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Do I Have to Buy the Home at the End of the Lease?

by | Jul 1, 2022 | Rent to Own

Do I Have to Buy the Home at the End of the Lease?

So, you want to buy a house. You’ve been working and saving up for months and are finally ready to start looking for that perfect house. You walk into the mortgage lender with your dreams and an impeccable credit score and find out you don’t quite have enough for a down payment on a traditional home loan yet. You feel absolutely crushed.

Don’t fret though! You have options going forward that will give you the flexibility of a renter and help you build equity as a homeowner.

In this situation, you might want to consider entering a rent-to-own home agreement. A rent-to-own agreement allows you to purchase the property at a later date than the end of your lease term. 

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Buying Your Rent to Own Home Depends on the Lease Agreement

Like most rental agreements, you’ll sign an agreement that details what you need to pay each month in rent—and how much interest will be added on top of that amount each month. 

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If you are in a decent place to begin a rental agreement, it means that instead of just paying rent during your lease period, the landlord will also put an agreed-upon percentage or portion of the rent into an escrow account. This money will go toward the down payment and the purchase price of the property.

An option to buy or a “lease option” agreement is more flexible than a lease purchase, as you are not obligated to buy the house at the end of the lease agreement. 

If you are looking for more of just “test-driving” the property and the area before you lay down roots through homeownership, this will probably be the best choice for you, as the lease terms are often only 1 to 3 years. 

Keep in mind that an option to buy may be more expensive by the time you reach the end of your lease agreement. There is what is called an option fee, which will be paid to the seller at the time of signing the lease agreement. 

You will likely pay a higher rent. It will require an option fee paid to the homeowner at the time of signing, typically 2 to 7% of the future purchase price of the house.  You will pay rent, but a portion of it will go toward the eventual down payment, which will typically be lower than what you would have paid upfront. 

But do you have to buy the house at the end of your lease? What if you don’t like the house or the neighborhood? What if you need more space? 

If you choose not to purchase the property, your lease will simply end as every other one does. The whole point of it being an option is to remain an option. Your landlord will make you an offer at the end of your lease saying you can buy the house for an agreed-upon amount. You may choose to accept it, get the mortgage loan, and purchase the home.

However, if you do not want – or are not able – to purchase the house, the option will expire. You will then leave the home just as you would renting another rental property. 

At the end of your lease, you will be able and have the legal right to purchase the house, Be aware: you will likely lose out on any of the money you paid up to the end of your lease agreement, especially the rent credit and the option fee. 


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