Declined a Home? Rent to Own!

by REICO on 22 November 2018

How a Rent to Own Program Can Help You Purchase The House of Your Dreams

With the cost of buying a house seemingly always on the rise, it’s becoming more and more difficult for many Canadians to make their dreams of homeownership a reality. Luckily, there is a solution to this problem, even if you don’t have the down payment or the credit score needed to get approved for a conventional mortgage. It’s called a Rent to Own program, and it may be the perfect way for you to finally become a homeowner.

Do you know what the minimum credit score required for mortgage approval is? Learn here.

What is a Rent to Own Program? With REICO’s Rent to Own Program, buyers essentially pay a “rent” every month, similar to a traditional lease. The big difference is that after the contract expires, you’ll have the option to purchase the property you’ve been renting all this time. Of course, you also have the option to waive your right to purchase the property if you so choose.

A portion of the rent payments you make will go toward the purchase price of the home. So essentially, you’re contributing to your down payment while still being able to live in the home.

These programs require you to sign a contract, which will stipulate how long you will rent it out before the option to purchase is on the table. An agreed-upon purchase price will be stipulated when you sign the contract. The owner of the property will not be able to sell the property to anyone else unless you choose not to exercise your right to buy, then the owner has the right to sell to another party.

Benefits of a Rent to Own Program: There are plenty of benefits of a Rent to Own program for both buyers and sellers. For buyers, in particular, the following benefits can be taken advantage of:

Growth in home equity. A percentage of every rent payment you make will go toward the equity in the property. Rather than paying rent to a landlord, every payment you make will contribute to the purchase of the property.

Lock in a price. If the market improves over the time that you are paying rent, you might end up with a home that is worth a lot more than the agreed-upon price when you first entered the contract. That translates into instant equity that you can take advantage of. And if the home is worthless, you still have the option to back out of the deal.

Minimal down payment. While you’ll still need to provide a small amount of money up front with REICO’s Rent To Own Program, it is usually far less than the average down payment for a conventional real estate transaction (for more information about saving for a down payment, click here). High-ratio conventional mortgages require that a minimum of 5% of the purchase price of a home needs to be made.

Depending on the market you’re buying in, this can translate into a hefty amount. For instance, the average sale price of a home in the Greater Toronto Area (GTA) is a whopping $757,365. If you were to put a 5% down payment, you’d have to come up with $37,868.25, which is a huge sum of money for many Canadians.

Instead, a Rent to Own program requires far less money up front, making them a much more affordable option.

Buy with bad credit. Many consumers are unable to secure a mortgage because they have bad credit. But with a Rent to Own program, buyers who are unable to qualify for a mortgage can purchase a house despite their bad credit. If they use their time wisely, they can improve their credit scores while paying rent and become better qualified to get approved for a home loan when it’s time to buy the house.

Who Should Consider Renting to Own? While REICO’s Rent to Own Program can be a great option for many different types of Canadian consumers, it could be particularly beneficial to those in any of the following situations:

You’ve Been Turned Down by The Banks? For those consumers who have been turned down by multiple banks because of poor credit, not enough of a down payment, etc., a Rent to Own program is a great way to get the house you want while also gaining the time you need to save and improve your credit score.

If You’re Not a First Time Homeowner? In Canada, first time home buyers can benefit from the Home Buyers’ Plan which allows you to borrow from your RRSP savings to cover the cost of your down payment. If you are not eligible to take advantage of this, REICO’s Rent to Own Program is another program that can provide you with the assistance you need.

You’re Self-Employed: Often those for are self-employed may encounter a wide variety of issues when applying for a mortgage, banks are not fond of sporadic income. A Rent to Own program can eliminate the majority of those problems and provide you with some extra time to get your finances in order.

You Have Bad Credit or No Credit: Enrolment in REICO’s Rent to Own Program is not dependent on your credit score. Rather, factors like down payment and income are more important. Keep in mind that applicants should be willing to use this time to improve their credit.

You’re New to Canada: Borrowers who are new to Canada can take advantage of the benefits of a Rent to Own program and start living in a house that works for them and their families long before they are able to qualify for a conventional mortgage.

You’re Dealing With a Judgment or Bankruptcy: A black mark like a judgment or bankruptcy can be difficult to recover from. If you’re currently dealing with one of these and are having trouble getting approved for a mortgage, a Rent to Own program is a great way to get the house you want and the time you need to improve your finances.

Ready to Finally Start Owning? If you’re looking to become a homeowner but are having difficulty getting approved for a mortgage because of credit, debt, or employment issues, we can help find you a house and guide you through REICO’s Rent to Own Program, so you can finally make your dream of homeownership your reality.