1. What is Lease to Buy House Payment?

A lease-to-buy house payment consists of two main components: depreciation (the value lost during the lease term) and finance fee (the cost of borrowing the money). The monthly payment is the sum of these two components.

2. How Does the Calculator Work?

The calculator uses these equations:

Where:

• \( CC \) — Capitalized cost ($)
• \( RV \) — Residual value ($)
• \( T \) — Term (months)
• \( MF \) — Money factor (decimal)
• \( Dep \) — Depreciation ($/month)
• \( Fin \) — Finance fee ($/month)
• \( MP \) — Monthly payment ($)

Explanation: The depreciation represents the portion of the asset's value you're using up each month, while the finance fee represents the cost of financing the lease.

3. Importance of Lease Payment Calculation

Details: Understanding these components helps you negotiate better lease terms, compare lease vs. buy options, and budget accurately for housing costs.

4. Using the Calculator

Tips: Enter all values in the specified units. Capitalized cost and residual value should be in dollars, term in months, and money factor as a decimal (e.g., 0.0025 instead of 2.5).

5. Frequently Asked Questions (FAQ)

Q1: What is capitalized cost?
A: This is the negotiated price of the house for lease purposes, similar to a purchase price but for leasing.

Q2: How is residual value determined?
A: The residual is the estimated value of the house at lease end, typically set by the leasing company.

Q3: What's a typical money factor?
A: Money factors typically range from 0.001 to 0.004. To convert to approximate APR, multiply by 2400.

Q4: Are there other fees not included here?
A: Yes, this calculation doesn't include taxes, insurance, or other fees that may be part of your total payment.

Q5: How does this compare to a mortgage?
A: Lease payments may be lower than mortgage payments initially, but you build no equity until you exercise the purchase option.