What is Rent to Own?

Do you want to own  your home instead of rent?

Do you have bad credit?

Do you have at least 3% down payment or willing to work towards this?

Do you have a steady source of income?

Do you currently pay $1200 in rent + utilities?

If you have answered yes to any of these we can help.

 

How does this work?

A Rent-To-Own is very similar to a car lease.

With a car lease you put down a deposit and make payments for a specified period of time at the end of the lease you have the option (not the obligation) to purchase the car for a predetermined price.

 A rent to own works in much the same way. A buyer puts down a “purchase option” deposit, usually  less than the traditional 5% required by the bank and makes a monthly payment. A portion of the rent is a credit towards the future down payment.  The end purchase price is predetermined at the time of signing.

During the three year lease term, the tenant works with a mortgage broker to ensure they are able to qualify for a mortgage at the end of the three year term.

If situations change and the tenant no longer wants to purchase the home at the end of the term, the tenant can move on and the investor will retain the home (the tenant will forgo any credits and deposits).

 

Benefits of Rent to Own vs. Traditional Rent or Purchase?

Simply put, the main benefit is putting you in your own home quicker.

With traditional rent, your rent goes in the landlords pocket and you have nothing to show for at the end of your lease.

With a rent to own home, a portion of your rent goes toward the eventual downpayment on your home.  Other key benefits include:

 

• You don’t need to qualify with a lender

• You don’t need a 20% downpayment – 3-4% is often enough to get started

• You don’t have to have a spotless credit history

• You get into your house now vs. years down the road

• You lock in your purchase price upfront

 

Who is Rent to Own for? 

Rent to Own buyer generally fall into the following categories:

• Self employed

• Small business owners

• Good income but no credit history

• Good income but poor credit

• Previously Bankrupt or Consumer Proposal

• New to Canada

• Lack a down payment large enough to obtain conventional financing

 

Legal agreements?

• A rent to own tranaction is typically governed by three legal agreements:

• Lease Agreement – a typical rental agreement outlining the conditions of the rental term and lease payments.

• Occupancy Agreement – outlines the responsbilities of the tenant and owner.

• Option to Purchase – outlines the final purchase price and closing details (typically 36 months from start of rental term)

• As with any legal transaction, we encourage you to review the documents with your lawyer.