“Rent to own” is basically a rental contract with the option to buy a home at a predetermined price after the rent-to-own period ends. A portion of the rent paid goes toward equity and also toward establishing or building credit. For a structured real estate option to be effective in Canada, a non-refundable consideration is paid to the property owner which is usually a few percentage points on the value of the home.
In exchange for this option payment, the home buyer or rent to own home buyer is given the option to buy the home at a settled on price no matter where real estate values go. Having an option does not usually mean the potential buyer is forced to buy the home, only that they have the option to buy it in the future in exchange for the option premium.
Rent to own with option to buy contracts are particularly becoming popular in Toronto, Ontario and also in neighboring Mississauga. The option part of the funds is not counted as a security deposit or towards rent, but applies to the home for the purpose of locking in the current negotiated value even if the real estate market recovers and prices go up.
Caveats include paying rent on time during the rent-to-own period as well as treating the home as a rental during this period. (ie. permission still may be required for making improvements or alterations to the home). Monthly rental amounts are typically somewhat higher in a rent to own home situation but a portion is applied toward the actual purchase of the home creating a forced savings system that helps accumulate the necessary down payment when the transaction is completed.
Many rent to own home agreements will also require minor repairs to be done by the renter/buyer as their intention is to buy the home after the rent-to-own period expires. Major repairs such as roof problems and structural issues remain with the actual home owner until the option is exercised by the new home buyer. A rent to own home program can help renters become home owners as they build equity during the rent-to-own home ownership period. This also provides a time buffer to get credit ratings in order and emerge from prior financial problems reflected on a potential buyer’s credit history. It is highly recommended that properties under consideration be inspected by a qualified home inspector.
A home inspector is often on the list of professionals you’re reputable rent to own home company will put you in touch with before making any decision on a particular property. A rent to own home option in Canada allows the potential home buyer to test a neighborhood and house before committing to outright purchase. Rent to own home programs are becoming more popular in places like Ontario, Canada. In the Toronto area, rent to own homes are widely available.
New Canadian legislation has made it somewhat more difficult to qualify for a mortgage in Ontario. As a result, a rent to own home program can help build the necessary credit history, rating and income to satisfy current Canadian loan requirements. Knowing the future purchase price is already fixed, a rent to own home program can also help lock in the selling price and take advantage of increasing home equity sooner. Recent changes to the laws in Ontario, Canada now make it virtually impossible to obtain a home in Canada with 0% down financing. Home owner insurance is required for all homes purchased with less than 20% down in Canada. Minimum down payments and income verification are now more stringent than prior to the global economic meltdown of 2007-2008. In Canada, there is no requirement to have to deal with banks, mortgage or finance companies when completing a rent-to-own contract.
This allows those that are just building credit or even those with bad credit to get into home ownership while establishing or rebuilding credit. Rent to own home programs may just be the right vehicle for first time home buyers. When deciding on a rent to own home program in Canada, consult with a trusted resource to help you navigate the process. Sandstone Management helps renters become home owners in Ontario, Canada.