When looking at a home for lease purchase, what formula should I use to figure a monthly payment?

Asked by Tnthall, Charlotte, NC Sun Jun 7, 2009

Is there a set or usual formula or is it generally up to the owner?

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Daniel Eberw…, Agent, Clayton, NC
Sun Jun 7, 2009
It's up to the owner, there is no set formula. Vivian described more owner financing, with the deed in the buyer's name and loan from the seller. Lease purchases are similar to rentals, with a portion of the monthly rent going toward a down payment.

There is no standard NC contract that Realtor's use for lease purchases, so a lawyer MUST be involved to draw up the contracts.

Typically, a seller is going to want to cover the cost of their mortgage/insurance/taxes/HOA fees and the amount being applied to the down payment each month. Often, the monthly amount for a lease is higher then what a mortgage on the house would cost.
Web Reference:  http://www.tri4sale.com
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Vivian Olkin, Agent, Carrboro, NC
Sun Jun 7, 2009
I am in the process of working out the same thing. I just brokered one for a buyer, and am now doing my own where I am the seller and I have an unrepresented buyer. This needs to be a win win for both sides, so we have a lawyer writing up the agreement. We used a lawyer for the one I just did. A lease purchase is so much like seller financing, I'm not sure the difference. For both cases, I used a reasonable interest percentage--6-6.25%, and set it up like a mortgage, with a fixed monthly payment. Following an amortization schedule, a varying amount goes toward principle which is credited to the buyer.

The buyer will want the deed in his/her name, with the seller having the loan/lien. Therefore the buyer is responsible for taxes, insurance, repairs, etc. The seller has the loan and operates as a bank. The buyer puts a down payment, mutually agreed upon by seller and buyer, generally lower that they would pay with a bank.

If the buyer defaults, everything they have paid toward principle is forfeited--just as with a bank. If the buyer doesn't default but is able to refinance in 3 years, all the money paid for down payment and toward equity/principle is credited to their 20% down, and the house is soon theirs.

I believe we'll be seeing more seller financing in the next year.

The important message: use a lawyer. Call me if you want to discuss this or have specific questions.

Vivian Olkin with Keller Williams in Chapel Hill
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