How Rent-to-Own Works : Explaining the Pros and Cons

Homeownership isn’t the ideal option for everyone. It is completely dependent on one’s situation; whether it be your financial situation, employment situation, or you are new to Canada. Other hindrances that may affect this decision are a recent divorce, filing bankruptcy, etc. Don’t feel as though you are at completely dead end in terms of what to do, you can make the decision to rent-to-own. What does that entail exactly? Rent-to-own works as two agreements between you and the landlord. Also known as ‘option to purchase,’ both contracts must be signed before property access is given. The lease agreement is typically 3-5 years in length – depending on one’s situation of course. Use that time length as a way for you to repair your credit, put yourself in a better position for a more conventional mortgage in the future, and save for a down payment accordingly. There are obvious advantages of a rent-to-own agreement, there are some pitfalls to the rent-to-own agreement. There is not as much control over the property. It isn’t just your property, you aren’t able to have the freedom to make adjustments. Not paying your rent on time will cost you the right to purchase. If you don’t end up buying the home, you would lose the money that went towards a down payment as well as the equity in the property. There may be issues in the property that you were unaware of prior to its purchase. Options like rent-to-own are a chance for an individual to become a homeowner when it seems like obstacles are in their way. It’s important to do your due diligence, research, and make sure to fully understand the rent-to-own agreements required in Ontario. Be sure to speak to a mortgage specialist at (416)-621-7501 before you take the next steps.