1. What is Lease With Option To Own Mortgage?

A lease with option to own (also called rent-to-own) mortgage is an agreement where a tenant rents a property with the option to purchase it later. The mortgage calculation helps determine what the monthly payments would be if the purchase option is exercised.

2. How Does the Calculator Work?

The calculator uses the standard mortgage formula:

Where:

• \( MP \) — Monthly payment ($)
• \( P \) — Principal loan amount ($)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of monthly payments (term in months)

Explanation: This formula calculates the fixed monthly payment required to fully amortize a loan over its term, including both principal and interest.

3. Importance of Mortgage Calculation

Details: Accurate mortgage calculation helps tenants evaluate whether they can afford to exercise the purchase option and plan their finances accordingly.

4. Using the Calculator

Tips: Enter the principal amount (purchase price minus down payment), annual interest rate, and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is this different from regular rent?
A: Part of each payment may be credited toward the purchase price if the option is exercised, unlike regular rent.

Q2: What's a typical term for lease-option agreements?
A: Typically 1-3 years before the purchase decision must be made.

Q3: Are interest rates higher for lease-options?
A: Often slightly higher than traditional mortgages due to the added flexibility.

Q4: What happens if I don't exercise the option?
A: You typically forfeit any option credits and the property remains with the owner.

Q5: Can I refinance after exercising the option?
A: Yes, once you own the property you can refinance like any other mortgage.