Rent to Own

Rent to own can be an equitable answer for both a Buyer and Seller under certain circumstances. For a Buyer it is a way to start the owneship process while you are short the down payment or have credit challeges that will take a year or 2 to repair. For the Seller it can be a way to sell a property when the market is slow, lenders are being more stringent with loans or they want to delay a capital gain.

How it works

The Buyer and Seller agree to a selling price. The deal wil usually close in 1 - 2 years. The buyer signs a lease for the property for that amount of time. The Buyer will pay a higher than market rent with the excess put toward the down payment (banks like to see this when it comes time to qualify for a mortgage). The Buyer pays an option to purchase fee of between 2 - 5 percent (this forms part of the down payment). This amount is non refundable along with the extra rent credits - if you DO NOT CLOSE ON THE DEAL, YOU LOSE THIS MONEY. If you fail to make the monthly lease payments you will be evicted an lose your money - just like being foreclosed if you don't make mortgage payments. A good agreement will make an allowance for an extension of the lease if you still don't qualify for the mortgage at the end of the term.

Example

Price - $279,000.00

Rent - $1500.00/m

Rent Credit - $250.00/M

Option Payment - $10,000.00

Term - 24 months

At the end of 24 months;

rent credits $250.00 x 24 = $6000.00

Option Payment =$10,000.00

This will give you $16,000.00 total down payment, a little more than the 5% ($13,950.00) down payment required by CMHC

You will need to have an income of approximately $3600.00 per month to qualify for the Mortgage.

Once you have the mortgage, you excersise your option to purchase and the home is transffered into your name.

Contact us - if you would like to Buy or Sell using a Rent To Own option