What Are Some of the Advantages of Leasing a Property Over Purchasing a Property With a Loan?

• In some cases, leasing makes more sense than buying. Hemera Technologies/AbleStock.com/Getty Images

  When searching for housing, you have the option to purchase a home with a mortgage loan or rent. If you choose to rent, most landlords will require that you sign a lease that defines your rights and responsibilities as a tenant. While buying a home may seem like a better option, leasing a property carries several clear advantages over purchasing a home outright.

Fixed Payments

• According to the Georgia Department of Community Affairs, most lease contracts clearly state a fixed monthly rent that you are required to pay for the duration of the lease. This protects you from fluctuating market prices that could otherwise impact the amount you'd pay on a mortgage.

  Many mortgages carry an adjustable rate. If you accepted any form of adjustable rate mortgage, you risk your interest rate fluctuating and leaving you responsible for a higher monthly payment. The Federal Trade Commission notes that even if your interest rate was fixed for the life of your mortgage loan, you are still responsible for paying taxes and insurance on the property. Taxes and insurance can also fluctuate. Thus, payments on a lease agreement are more stable than payments on a mortgage.

Lower Credit Requirements

• When you apply for a mortgage loan, you can expect a credit check. Your credit score influences not only whether you qualify for a mortgage loan, but how high your interest rate will be. Your interest rate, in turn, affects your monthly payments. Past credit mistakes can leave you paying much more for your home than you would otherwise, or bar you from qualifying for a loan altogether. The credit requirements necessary to rent are typically lower than the credit requirements you must meet to qualify for a reasonable mortgage loan. This makes leasing an apartment or rental home easier than taking out a loan for a home for those with imperfect credit.

Lower Upfront Costs

• Although programs exist that allow borrowers to purchase a home without a down payment, the qualifications are strict and such programs are few and far between. Depending on the mortgage lender and type of loan you apply for, you could end up paying up to 20 percent of the total loan amount up front, in addition to lending fees, title fees and escrow costs. While many leases require a security deposit, most security deposits are far lower than the down payment and fees you would pay during the home-buying process.

Eviction/Foreclosure Concerns

• If you stop making payments on your lease, your landlord reserves the right to evict you and pursue you for rent on the property until she can locate a new tenant. If you stop making payments on a mortgage loan, however, the consequences are often far worse. Not only can your mortgage lender evict you and foreclose on the property, in many states it can sue you for the full remaining balance of the loan, which would far exceed any unpaid rental charges you'd face from walking away from your lease.