What component accumulates in a savings account for a down payment in a lease-purchase mortgage?

In a lease-purchase mortgage arrangement, the component that accumulates in a savings account for a down payment typically refers to the PITI payments. PITI stands for Principal, Interest, Taxes, and Insurance. These are the four components of a mortgage payment.

In this context, "PITI Payments" represents the monthly payments that the tenant-buyer makes, which often include a portion that is set aside to go toward the future down payment. This setup allows renters to not only cover their cost of living but also to gradually build equity through a portion of their payments. As a result, over time, the accumulated funds from these payments can be utilized as a down payment when the lease-purchase agreement transitions to a sale.

Recognizing how PITI functions in this scenario helps to understand the financial planning aspects tied to lease-purchase agreements, offering tenants the ability to work towards homeownership while they fulfill their rental obligations.