Monthly payments cover the cost of the housing and include the remuneration for the leasing company; when the lease term expires, it is possible to extend it or buy out the living space by paying the full remaining amount. Immediately after signing the contract, the borrower has the opportunity to move into the apartment, perform renovations, and register themselves and their relatives. Both legal entities and individuals can purchase real estate through leasing. Real estate leasing is steadily gaining popularity in Ukraine, and there are compelling reasons for this: purchasing an apartment through leasing is more convenient than taking out a mortgage.
Housing in leasing: advantages and differences from a mortgage
- To obtain housing through leasing, a simplified package of documents is required. For instance, an income statement is not necessary, and in general, leasing requires fewer documents confirming the financial well-being and reliability of the borrower. The requirements are much softer because the risks in the case of leasing are significantly lower.
- The speed of transaction execution is higher than when purchasing an apartment through a mortgage.
- An individual payment schedule can be agreed upon, tailored to the client's convenience. It is designed by taking into account the specific characteristics of the client's financial situation and income. Special terms can even extend to lease interest rates, whereas mortgage rates cannot boast such flexibility.
- Lease payments are lower than mortgage payments—they are comparable to regular rent amounts. However, unlike renting, the client is insured against unexpected eviction or a sudden increase in rent. The property price remains fixed, which is particularly beneficial for the client, as the real estate may appreciate during the lease term, allowing for a significant profit if the purchased home is eventually sold. In turn, mortgage rates are higher than leasing rates and can change throughout the contract term. Additionally, various commissions may be present in the contract, increasing the total amount of payments.
- The down payment for leasing is either completely absent or is around 10%. This is less than what a mortgage requires: its down payment percentages vary from 10% to 30%.
- Real estate leasing provides the opportunity to sublet the space, whereas mortgage terms often prohibit this.
- By deciding to purchase an apartment through leasing, you receive a real insurance service. A mortgage, on the other hand, involves a nominal insurance service as an additional bank commission.
- Another point in favor of purchasing real estate through leasing: all property taxes up until the moment of buyout are paid by the leasing company. After all, the asset remains in their ownership throughout this entire period.
- To take real estate in leasing—collateral is not as important. Most often, it is not needed at all, since the housing remains the property of the lessor until the moment of buyout, and the risks for them are minimal. If you decide to take a mortgage, the property will either pass into your ownership or become collateral for the bank. That is precisely why mortgage terms are much stricter.
Understandably, all terms will be specified in the contracts—this applies to both leasing and mortgages: interest rates, payment schedules, the total amount, etc. Carefully study the contract before signing so that none of the terms come as a surprise to you. If you have any questions, ask the company's representatives.