Q–You’ve written several times about home lease options, which you recommend for both buyers and sellers. I recently saw a newspaper classified ad for a “lease purchase.” Is that the same thing?
A–No. A lease with option to purchase gives the tenant the opportunity, but not the obligation, to buy the property at the agreed option purchase price. A lease purchase requires the tenant to buy the property by the end of the lease term.
I prefer lease options because the tenant is not obligated to buy if the home (or other property) turns out to be undesirable. Of course, the lease-option tenant who does not buy loses the option money and the rent credit toward the purchase price. However, a lease-purchase tenant is in breach of contract if he fails to complete the purchase.
Sellers (and their anxious realty agents) who want to be relatively certain their tenant will buy usually prefer a lease purchase. I’ve found that a lease option accomplishes the same result by giving the tenant a substantial rent credit, such as 33 to 50 percent of the rent paid.
Q–We want to refinance our home loan to reduce the interest rate and take out tax-free cash to pay some bills. A mortgage broker seemed to offer the ideal loan for us, so we paid him a $500 application fee. But we heard nothing after 30 days.
When we phoned him, he kept saying, “These things take time.” After 60 days, I went to visit his office and found that the loan he promised never was available. He offered us a totally different loan with a higher interest rate and a prepayment penalty. When I demanded our $500 back, he said it is nonrefundable. What should we do?
A–Small-claims court is the appropriate place to sue the mortgage broker for a refund of your $500 due to breach of contract. Unfortunately, there is little else you can do when a mortgage broker doesn’t deliver.
A few bad mortgage brokers, like yours, give the entire industry a bad reputation. Also, it is your civic duty to report that mortgage broker to the appropriate state license officials for possible discipline. He made false promises and breached his fiduciary duty to you.
In my opinion, mortgage brokers like that should have their licenses revoked.
Q–We bought our home in February with an owner-occupied mortgage. The lender made a big deal of having us sign a form saying we intend to occupy the house as our residence. But my wife hates the house and the neighbors. In April, we moved to a rental apartment. We rented the house to my brother and his family. Can the mortgage company call our loan if they find out?
A–I’ve heard that some mortgage lenders check owner occupancy after a few months but most do not. I’ve never heard of a lender calling a mortgage due just because the owner moved out. Since you have a good reason for doing so, if the lender contacts you, a brief explanation of the facts should suffice.
