Lease Option – Could it be right be for you?

If you:

  • are facing repossession or have financial difficulties
  • have little or no equity
  • need to move quickly and have no further mortgage requirements
  • want to secure a price that is close to today’s full market price

The Lease Option

Sometimes selling a property for below its market value to a cash buyer is not the right choice for you, and sometimes it just isn’t possible, say if there is little or no equity in your property.

This is when we can consider a process called a Lease Option. This is something that has been widely used in Australia and America for many years and is now becoming recognised here in the UK as a way of helping desperate sellers to be relieved of their mortgage commitments and move on with their lives within a matter of weeks.

There are two parts to this process, The Lease is one and The Option is the other.

If, for example, you try selling your property with an Estate Agent in the current market, you will find that properties are not selling very quickly and it is possible that your property could be on the market for several months. The Estate Agent would probably suggest you keep reducing the price to attract more interest. But here’s the problem, if you don’t have much equity in your property it is very difficult for you to reduce the price. When selling to a cash buyer, the buyer is generally looking for a minimum discount of 25% on the market value.

This is where the Lease Option can help. As the seller of the property, you grant us an option to buy the property from you, but in the future. The option period could be for 5 or more years and the price is agreed at close to today’s market value for the property. However, now the Lease part takes over as from the time the option is agreed, we take over your mortgage payments and become responsible for the maintenance and upkeep of your property. You may then move out of the property and are released from its demands and obligations.

Depending on the housing market if and when we exercise our option to buy, it is possible that you too could make a profit.

Lease option example, how it works:

Let’s say, your property is on the market for £100,000 and you owe £90,000 on the mortgage. You may have to reduce the sale price closer to £90,000 to attract interest from a buyer but that could leave you out of pocket after you pay legal fees, agency fees and repay your mortgage. As well it could take months to sell and meanwhile you’re still paying the monthly mortgage repayments.

With a lease option, you would grant us the option to buy your property for £95,000 sometime within the next five years. During this time we will take over all of your monthly mortgage repayments. If we then exercise our option to buy the property at the agreed price of £95,000 you repay your mortgage of £90,000, that means you will have made £5,000 profit as we have no legal fees for you to pay!

If for any reason we choose not to use our option to buy at the end of the option period, the property would either be returned to you, or a further option period granted. By this time you would have had the benefit of not paying the mortgage and will have been given the freedom to get yourself back on track. Hopefully the property would have increased in value. Please note though, that generally the option to buy is exercised.

We can help you. Let us talk you through how…

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