It is not possible for everyone to arrange finance of the magnitude required to buy a house at short notice or even in the medium term. The causes may be several ranging from lack of enough savings to a bad credit history. Moreover, banks nowadays do not lend money like they used to after the global financial shake up and that is making availability of money extremely tight in the market.

So what does a person do in these circumstances?

One option is to go for a lease purchase agreement. This is an agreement that is reached between the seller and the purchaser wherein the purchaser commits to purchase the house in question at a later stage - either after a few months or a couple of years depending on his capacity. As a purchaser, you do not have to make immediate large down payments and get valuable time to make arrangements to accumulate funds for the purchase by the committed time.

It is like blocking a property now to take complete possession at a time that is convenient for you.
Under this agreement, you are only required to pay a margin payment that is about 3% of the value of the house along with an advance payment of a month's rent. The agreement is then inked out and you will become obliged to buy the house at a time you agree to with the seller. The interim period is the lease period. The deposit or the initial payment that you have made is totally non refundable.

In addition to the above payment, you have to make monthly rental payments through the lease period and the amount will be clearly laid out in the agreement. A fixed portion of this payout will go towards the purchase amount of the house such that by the time the lease ends, you will have to pay a much lesser amount for buying the house. If you desire to extend the contract, you will have to take the express permission of the seller. It is thus advisable to be fully aware of your financial capabilities and plan carefully so that you are clear about when you would want to purchase the house.

The time that you get to arrange the finance must be utilized properly by you as it would not be appropriate to default on the commitment. Moreover, you must also ensure that you do not miss out on any of the monthly rental payments during this lease period. Any default can make the seller cancel the agreement and you will be the loser since you would have lost all the payments you had made till then.