What is an equity lease agreement?

An equity lease agreement is a financial arrangement where a tenant leases a property with an option to purchase it at a later date, typically at a predetermined price. During the lease term, a portion of the rent paid may be credited toward the purchase price, allowing tenants to build equity in the property. This type of agreement can benefit both the tenant, who gains a potential future investment, and the landlord, who secures steady rental income. Equity lease agreements are often used as a pathway to homeownership for those who may not qualify for traditional financing initially.