OfflineI've had someone ask me, this, and I've been wondering this same thing. I've searched over google, but never found an answer. I know the adjustable rate mortgages (ARM) has a interest rate it caps out at. It it's possible, how would you structure the deal? Thanks, guys!
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When you are doing a lease with an option to purchase you should check the terms of your loan. Many ARM have caps on the interest rate where the rate will not exceed a certain interest rate or it is set for a specific time frame. With that in mind you could set the payment on the lease payment where it would still cash flow above the highest possible interest rate that would be charged. I hope that this information helps.
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If you do the lease option for longer than one year you can set up the payments of the lease option tied to the rate fluctuations of the ARM; i.e. every year, when the rate of the ARM adjusts and the mortgage payment is adjusted; the lease option payment is adjusted as well.
On the other hand, if you do a lease option for 12 months, you can renew the lease option on the 13th month with the new payment amount reflecting the increase/decrease? from the ARM...
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