I have a question about lease to purchase options. Do they require 25% equity in the home like renting it does?

Asked by alc1113, Audubon, NJ Mon Feb 27, 2012

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Roland Vinya…, Agent, Sprakers, NY
Tue Feb 28, 2012
Lease/purchase arrangements are typically done between buyer and seller, without the input of a bank, so there is great variety among them. The ones I have done have not required anything like that much equity in order to pass title.
1 vote
Elisa Dewees, Agent, Cherry Hill, NJ
Mon Feb 27, 2012
The lease itself does not require the equity in your current home. It comes into play when you need to apply for your mortgage and fulfill the terms of the contract for sale. A lease purchase is a guarantee that you will complete the purchase and the time-frame can be negotiated (unlike a Lease-Option which only gives you the option to purchase at the end of the lease).
Check with your mortgage rep and see what your time-frame will be to be able to complete the purchase before moving forward with the terms of the lease-purchase. Also have an attorney involved because it can be complicated.
1 vote
Marsha Bowen…, Agent, Livingston, NJ
Mon Feb 27, 2012
Greetings Alc1113,

A lease option contract will depend on the terms agreed by the seller. A 25% equity stake is not necessary, however some sellers do ask for a down payment which will apply towards the purchase price.

Best of luck to you,
1 vote
Ronald Shaff…, Agent, Toms River, NJ
Mon Mar 5, 2012
I have done a couple of lease/ purchase agreements in the last two years. 25% equity has never come up. Like the previous answer , I would strongly reccomend you get a real estate attorney to draw up the paperwork for your protection. best of luck to you.
0 votes
Gerard Carney, Agent, Spring Hill, FL
Thu Mar 1, 2012
The only one you should talk to about this type of sale/rental is a Real Estate Attorney. Find a local one and pay the small consultation fee if they even charge one.
0 votes
Wayne Odenbr…, Agent, Mountain Lakes, NJ
Thu Mar 1, 2012
Move forward with care. There are a lot of pitfalls in such an agreement, for both the Owner and the Buyer. I suggest you involve the right Attorney
0 votes
Robert Green…, Agent, Cherry Hill, NJ
Tue Feb 28, 2012
Hi alc1113!
I am very familiar with your challenge. There are pros and cons to your solution. Call me, I would be happy to learn a little more and help you figure this out.
-Robert Greenblatt
Keller Williams Realty, Cherry Hill
0 votes
alc1113, Home Buyer, Audubon, NJ
Mon Feb 27, 2012
just to follow up in case I wasn't clear. We want to buy another house and cant use rent from our current house without 25% equity in our current home. If we did a lease to purchase of our house so we can buy the other house, is 25% equity needed in our current home? House has been on the market for 5 months and unfortunately running out of time to buy the other property.
0 votes
Good Morning Alc1113. I know this post is a tad old, but I still wanted to answer your question. The lending rules have changed greatly over the past few years. Recent lending guidelines now require you to have roughly 20% equity in the property you are using as a source of income, AND some lenders require that you have a record of on-time payments (sometimes 6 months or a full year). Basically lenders want to make sure you have a stable income property that is reliable and consistent. The lender wants to better manage their risk, and they want to ensure you as the buyer aren't getting yourself into a sticky financial situation.

I hope this helps.

Shawn Burke
Flag Wed Sep 12, 2012
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