Lease Purchase Declining Principal Balance

[Justin Cutler]

Has anyone structured one of these? Do you have a contract that you've used? I'll run it by my local attorney of course. Basically -

I can buy a property that I've leased for the principal balance at time of execution. At the end of the loan, I get the property for free essentially.

[Bill Gulley]

Justin, this sounds like an assumption with a warp designed or called a lease. If your payments are applied to the principal outstanding it is an installment purchase regardless of what they call it.

There is a sham going on, I'll guess at this just knowing what some gurus try to devise. A lease is made so that the seller can call the buyer a tenant thinking they can evict in the event of default. But, as the mortgage is reduced the buyer will still obtain an equitable interest in the property, at a point of having 10% in any reduction, or credits, the seller may need to foreclose. If there is no security agreement covering foreclosure you'll be going to court. I say sham because of the nature of calling the purchase agreement a lease.

This is not new, some variations are used by non-profits as they first lease to a buyer to establish credit and later move the tenant to a purchase agreement with credits given for rents paid. Now, as I use those words, "rent credits" understand that these roll over to seller financing, not conventional financing. By the time a buyer gets to the point of applying for any future mortgage, they have been under a seller financed purchase for more than two years or so. :)