“Rent-to-own” is basically a rental agreement with the option to purchase a home at a predetermined price after the lease-to-own period is over. A part of the rent paid goes to equity and also to the establishment or creation of credit. For a structured real estate option to be effective in Canada, a non-refundable consideration is paid to the owner of the property, which is usually a few percentage points of the value of the home.
In exchange for this option payment, the home buyer or rent-to-own buyer has the option to purchase the home at a set price no matter where the property values go. Having an option generally does not mean that the potential buyer is obligated to purchase the home, only that they have the option to purchase it in the future in exchange for the option premium.
Rent-to-own contracts are becoming particularly popular in Toronto, Ontario and also in neighboring Mississauga. The option portion of the funds is not counted as a security deposit or toward rent, but is applied to the home in order to secure the current traded value even if the housing market recovers and prices rise.
The caveats include paying rent on time during the lease-to-own period, as well as treating the home as a rental during this period. (ie, permission may still be required to make home improvements or modifications). Monthly rental amounts are typically slightly higher in a rent-to-own situation, but a portion is applied to the actual purchase of the home, creating a system of forced savings that helps accumulate the payment initial required when the transaction is completed.
Many rent-to-own contracts will also require the tenant/buyer to make minor repairs, as their intention is to purchase the home after the rent-to-own period expires. Major repairs, such as roof problems and structural problems, remain with the actual homeowner until the new home buyer exercises the option. A home rental program can help renters become homeowners as they build equity during the home rental period. This also provides a window of time to get credit scores in order and emerge from previous financial problems reflected in a potential buyer’s credit history. It is strongly recommended that properties under consideration be inspected by a qualified home inspector.
A home inspector is often on the list of professionals that your trusted rent-to-own company will put you in touch with before making any decisions about a particular property. A Canadian home rent-to-own option allows a prospective homebuyer to try out a neighborhood and a home before committing to the outright purchase. Rent-to-own housing 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 a bit more difficult to qualify for a mortgage in Ontario. As a result, a home rent-to-own program can help develop the credit history, qualification and income needed to meet current Canadian loan requirements. Knowing that the future purchase price is already set, a home rent-to-own program can also help lock in the sale price and take advantage of increased home value sooner. Recent changes in the laws of Ontario, Canada now make it virtually impossible to get a home in Canada with a 0% down payment. Homeowners insurance is required for all homes purchased with less than a 20% down payment in Canada. Minimum down payments and income verification are now stricter than they were before the global economic collapse of 2007-2008. In Canada, there is no requirement to deal with banks, mortgage or finance companies when completing a lease-to-own agreement.
This allows those who are just building credit or even those with bad credit to gain home ownership while establishing or rebuilding credit. Home rent-to-own programs may be the right vehicle for first-time homebuyers. When deciding on a Canadian home rent-to-own program, consult a trusted resource to help you navigate the process. Sandstone Management helps renters become homeowners in Ontario, Canada.
