If a bank can call a loan due for a sub2 deal, then why can’t they call a loan due on a lease option? You are letting someone else make the payments the same way you do on a sub2?
They can under some circumstances.
Its not the fact someone else is making your payments that triggers the dosc but that you are transferring rights of ownership to someone else without the bank’s approval.
Exactly. With sub2 you get the deed. With a l/o you do not. In a l/o you are essentially a renter.
Who said the bank “can’t” call in the loan under a lease option? They have the legal right to do so. . .but they won’t most likely. First, they have to be made aware of the situation. Then, they have to go through the process of alerting the involved parties. And in this market, if the loan is being paid in a timely fashion, that’s all the lender is likely to be concerned with.
I was wondering because my parents bought a house on a lease option and the thought of a bank calling the loan due was never brought up in any subject by our realtor. It just got me wondering if there was a difference. Now I understand about the deed to the home. Thanks all.
The best way to handle a lease option or rent to own property, is to tell your lender at the time you apply for your mortgage that this is an investment property and will NOT be owner occupied. The lender should then include a clause in your mortgage stating that renting or leasing the property is o.k. This is how 1-4 unit apartment buildings are handled. The same can be done for a sfh, just ask the loan officer, and then confirm the clause is there at closing. If you already have a mortgage on the property, there should be a clause that states the lender can only invoke the dosc if you have not lived in the property for three years. That means you can rent or lease the property for three years without before the dosc becomes an issue.