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How Does Rent To Own Work In Canada?
You’ve probably heard about it a few times before, but exactly what is rent to own? It’s not actually just one thing, because there are different types of rent to own programs. At its core, this “involves entering an agreement between you and your landlord or rent-to-own company.” You rent a property as one would from a landlord, but a part of the rent you pay goes towards the purchase of the house you are renting. This is called “rent credit.”
There are two main types of rent to own arrangements:
1. Option-to-Purchase
The renter has the option, but not the obligation to buy the home when the rental term (usually 1-5 years) is over.
2. Lease-to-Purchase
The renter agrees to buy the house at the end of the term. Failure to purchase for any reason can lead to a penalty.
The first option is clearly a lot more flexible. With option-to-purchase, you have the ability to choose whether or not to buy the house or cash out your accumulated rent credits. With lease-to-purchase, your rent credits usually end up being the penalty you have to pay if you walk away from the arrangement.
When is rent to own a good idea? There are actually plenty of good reasons to rent to own. For most people, it’s the little push that they need to overcome the gap that they can’t cross on their own. Whether that gap comes in the form of rising housing prices, a huge down payment, insufficient credit scores, or anything else, a rent to own agreement simply bridges the gap. Whatever these hurdles may be, renting to own simply overcomes them.
4 Simple Steps To Rent To Own with Requity Homes
Renting to own is a different path to acquiring the house of your dreams. While we recognize that it’s not for everyone, more and more people find this route the most viable one for them as the housing market becomes more and more difficult to penetrate. It’s actually fairly simple to avail of this program when you know how.
The four steps are as follows: Apply to pre-qualify, Find your dream home, Move in and save up, and Buy your home or walk away.
Step 1: Apply to Pre-Qualify
Find out your eligibility and home budget. It's free and won't affect your credit score. It’s easy to apply, and you can even do it online! This step will help you determine if taking the rent to own route in Canada is a feasible way for you to become a homeowner in a few years’ time. At the same time, you will also find out how much you can afford given your current means, which will help you narrow down the dream house you are looking for.
Once you’re qualified to avail of a rent to own arrangement and you now know how much of a budget you have to work with to get your dream home, then it’s onto the next step - getting the house you always wanted.
Step 2: Find Your Dream Home
Go check out our listing page and pick the home you’d like us to purchase. We buy it. It’s that simple. This is really important, because this locks in the price you’ll be paying for the house down the road, so you don’t have to worry how much inflation would affect the price after your rent term ends. When you consider how much inflation has affected the Canadian housing market in the last couple of years, this is a safety valve that protects your potential investment from ballooning out of your control.
From here, you get to the third and most unique step in renting to own - test driving the house of your dreams.
Step 3: Move In and Save Up
Here comes the “rent” part of “rent to own,” and you now live in the dream home you chose. As you pay your monthly rent for living in this home, a part of your rent is set aside as savings for the fourth step. While this is happening, your credit score is also steadily improving because we report your payments to the credit bureau. This will put you in a better position for when it comes time to buy back the house, as your improved credit score could finally allow you to get the mortgage you need to complete your journey from renter to owner.
Step 4: Buy Your Home or Walk Away with Your Savings
A few years down the road, after having rented your dream house and finding out for certain whether or not this is really the house for you, your savings and improved credit score finally empowers you to make the ultimate choice: will you buy back the home you’ve always dreamed off, or will you choose to walk away and cash out your savings?
Don’t be worried that you might be taken by surprise by the costs. That price for buying back the home is no secret at all: you’ve already known how much it will be by the end of step 2! The power to choose is now absolutely yours!
The Bottom Line
It’s really as simple as it reads: renting to own is a valid path towards owning a house. With Requity, it takes only four simple steps, and yes, it can absolutely change your life for the better.
Whether you end up with your dream home or go looking for another one instead, the rent to own experience would no doubt have made a huge difference on the next stage of your life. In that wide gap between renter and homeowner, Requity will be with you each step of the way. > Get Pre-Qualified
