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Lease Option vs Lease Purchase: Finding The Right Fit For Homebuyers

Lease Option vs Lease Purchase: Finding The Right Fit For Homebuyers

A couple is calculating, real estate purchase options

Almost a decade after the housing crisis of 2007-2008, banks are still using strict credit requirements to approve potential home buyers for a mortgage. Many home buyers explored other purchasing options with a Chicago real estate lawyer, including lease-option and lease-purchase agreements.


A lease-option is the most flexible of the two alternative purchase arrangements. The potential buyer agrees to make monthly lease payments that are slightly higher than the going market rate for the property. The seller agrees to accept the portion of the payment above market value as a down payment when the lease period is over. Under the arrangement, the buyer may back out of purchase at any time before the end of the lease; however, doing so forfeits the money put aside for a down payment.


A lease-purchase is a more formal arrangement, protecting both the buyer and seller. The same lease agreement rules apply as in a lease-option, but once the term is over, the buyer must complete the purchase of the property, or lose all of the money applied to the down payment. The sale contract written into the agreement is a reason why home buyers seek the assistance of a Chicago real estate lawyer before signing the paperwork.

Making The Choice

In most situations, home buyers will want to work with a Chicago real estate lawyer for a lease-purchase agreement. This type of purchase is ideal for buyers who need time to:

  • Improve their credit enough to qualify for a home loan
  • Set aside additional money for a larger down payment
  • Sell their current property before accepting legal and financial responsibility for a new home

The agreement ensures the home will still be available when the buyer wants to purchase, while offering the seller a financial incentive to hold on to the home.

Lease-option arrangements are far less attractive to sellers, because there is no guarantee the buyer will make the purchase when the term is over. To cover the potential for loss, a seller may include premiums and other fees in the contract. Lease-options are primarily used by families who are moving into a new area and want to have the option to build equity in a property, without committing to a long-term purchase.

Any lease-to-own arrangement can be a legal and financial minefield, unless both the buyer and seller secure the services of a Chicago real estate lawyer.

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