Rent-to-own programs have become a popular option for Canadians who are unable to purchase a home due to financial constraints or lack of credit history. In this article, we will explore how rent-to-own programs work, their benefits and drawbacks, and their suitability for different demographics in Canada.
What are Rent-To-Own Programs?
A rent-to-own program is a contractual agreement between a landlord and a tenant that allows the tenant to rent a property with the option to purchase it at a later date. That program gives time to future buyers who cannot qualify today for a good mortgage to fix whatever challenge they have to later on become mortgage ready. Whilst they work on those challenges, the rent-to-own program will enable them to be already living in the property they aim at purchasing in the future.
How Rent-To-Own Programs Work
In a typical rent-to-own program, the tenant and landlord agree on the purchase price of the property at the outset. The tenant then pays a deposit and begins making monthly payments. These payments are split between rent and savings set aside as a credit towards the future purchase of the property. At the end of the agreed-upon term, the tenant has the option to purchase the property at the pre-agreed price.
Benefits of Rent-to-Own Programs
There are several benefits to rent-to-own programs, which make them a popular option for Canadians who are unable to purchase a home through traditional means:
- Access to Homeownership
The primary benefit of rent-to-own programs is that they provide a path to homeownership for those who may not be able to purchase a home through traditional means. This is particularly relevant for Canadians who have a poor credit history, do not have enough funds for a down payment or who cannot meet the stringent borrowing requirements of traditional lenders.
- Frozen purchase price
Rent-to-own programs will set your future purchase price of the property in advance before you start the program. You can work on fixing your challenges to become mortgage ready without worrying about prices going up.
- Lower Upfront Costs
Rent-to-own programs typically require a lower upfront cost than purchasing a home outright. This is because the tenant is not required to come up with a large down payment or to qualify for a mortgage. Instead, they pay a deposit and begin making monthly payments.
- Flexibility
Rent-to-own programs offer flexibility to both the tenant and the landlord. The tenant can directly move into the desired property they want to buy & start living as a renter. For the landlord, they have a guaranteed rental income for the term of the agreement and the potential for a sale at the end of the term.
- Coaching
Rent-to-own programs should provide the proper guidance whether you are familiar or not with real estate purchase transactions. At RentToOwn-Now our team of experts will guide you from the moment we assess your initial financial health to the moment you get the keys as the owner of your house.
Do Rent-To-Own programs provide mortgages?
A rent-to-own program does not provide a mortgage. It provides time to a future buyer to become mortgage ready whilst already living in the property they want to purchase. At the end of the rent-to-own program the tenant has to apply for a mortgage to buy their house.
How do I know how to become mortgage ready?
A great rent-to-own program should provide answers to that question. The first thing we do at RentToOwn-Now is tell you why you cannot qualify today for a good mortgage and set up a plan to fix it.
How to exit a rent-to-own program?
The best way we wish for you is to exit your rent-to-own program by getting approved for a mortgage and then purchase the property you are already renting to own. At RentToOwn-Now we will guide you through the entire process. Another option is to simply terminate the rent-to-own contractual agreement and not exercise your option to purchase the property. There is indeed no obligation for you to purchase the property but rather an option. You will then have to move out of the rent-to-own property.
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