Rent may or may not be applied to sales price. Enables renter to buy time to obtain down payment and decide whether to purchase. Locks in price during inflationary times. Failure to take option means loss of option fee and rental payments. Borrower owns mortgage-free property and needs income.
Lender makes monthly payments to borrower using property as collateral.
Can provide homeowners with needed cash. At end of term, borrower must have money available to avoid selling property or refinancing. Some lenders use the rule of thumb that it is beneficial to refinance your home when the new rate is at least 2 percentage points less than the old rate. However, following this rule may cost the homeowner a lot of money. In reality, a very small percentage point spread may justify refinancing if other factors are present.