Mortgage assistance does not always come in the form of a modification to your loan. On the contrary, some of the most effective and time-efficient methods of avoiding continued struggles with a mortgage, a too-high interest rate and the potential of interrupted payments are those which might not be obvious at first glance.
As the real estate community has gradually worked its way through the mortgage crisis, firms have established services that create markets for homeowners interested in avoiding the additional expense, credit issues and hassle of mortgage problems. Among the various solutions they offer, the lease option has become one of the most popular. If you are facing mortgage issues, here are some things you should consider, and remember, if you have questions we buy houses in Orlando and can help you through the process.
What is a Lease Option?
Simply put, an option is the legal right to buy or sell something at a given price within a given time interval. In the securities markets, options are used for a wide variety of purposes, mainly to provide investors and employees with future equity in a new enterprise.
In the real estate market, an option has considerable value, especially if it can be obtained at a price that gives the option holder a premium advantage with respect to the value of property. In a lease option, this means the home or building has the potential to increase in value before the option must be exercised.
The classic lease option is where a potential buyer leases a property from the owner for a term of months or years in exchange for a regular payment. If the owner is a mortgage holder, they can use this lease payment to offset some or all of their mortgage costs. When the lease expires, the buyer then has the option to buy the property at an agreed upon price.
Advantages of Leasing Options
Options have value independent of the value of the property or the disposition of the mortgage and any monthly payment schedule. It is for this reason they are often attractive to homeowners facing mortgage struggles. When an owner makes a lease option available, they can often obtain a small percentage of their home’s value up front in addition to monthly payments because for the buyer or lessor, the potential increase in the home’s value may far exceed the cost of the option.
The other major category of incentives for buyers and sellers of lease options is the offsetting package of tax advantages available. For example, lease payments are deductible. So is mortgage interest. The option payment isn’t taxable until the option is exercised. These three facts alone are often enough to completely offset any corresponding expenses related to the offer or purchase of a lease option. In fact, they are sometimes enough to justify improvements to the property sufficient to practically guarantee a profit for the buyer if they choose to sell after exercising their option.
As with any complex financial transaction, you should seek expert advice from a qualified professional backed by a reputable firm. Having the right people on your side as you navigate the process of solving a mortgage problem is one of the most important ways you can protect yourself and your family.