While there are many advantages to lease purchase, it has several
disadvantages for a buyer and seller also.
It usually takes 3 to 5 years before the option expires in a lease purchase agreement. Year after year, the property values may change continuously with changing economic conditions. Thus, the main disadvantage of lease purchase is that both the seller and buyer are locked into an agreement where the purchase price is not subject to change. The seller is locked into a lower purchase price even when there is a dramatic increase in the property price while the buyer will have to buy the property even when they found that the property is not worth the agreed upon purchase price due to a deep declines in the property value. Regardless of whether the property market price is going to up or down in the future, it is not fair to either party. Besides than property price, the interest rates are likely to change over time as well. If the market interest rates rise in the future, the buyer will sees his future monthly instalment going up. On the other hand, the seller is at risk of facing the situation where the potential buyer may not keep up the property as a result of not being able to qualify for a loan or being unable to afford to buy the house.
It usually takes 3 to 5 years before the option expires in a lease purchase agreement. Year after year, the property values may change continuously with changing economic conditions. Thus, the main disadvantage of lease purchase is that both the seller and buyer are locked into an agreement where the purchase price is not subject to change. The seller is locked into a lower purchase price even when there is a dramatic increase in the property price while the buyer will have to buy the property even when they found that the property is not worth the agreed upon purchase price due to a deep declines in the property value. Regardless of whether the property market price is going to up or down in the future, it is not fair to either party. Besides than property price, the interest rates are likely to change over time as well. If the market interest rates rise in the future, the buyer will sees his future monthly instalment going up. On the other hand, the seller is at risk of facing the situation where the potential buyer may not keep up the property as a result of not being able to qualify for a loan or being unable to afford to buy the house.
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