Rent-to-Own Becoming a More Popular Choice for Canadians
Matrix Mortgage Global – Rent-to-Own Becoming a More Popular Choice for Canadians
While fairly common in the U.S., rent to own agreements are much less familiar to Canadians. Recently however, that has started to change. Between new mortgage rules and several interest rate hikes by the Bank of Canada, more and more Canadians are asking their mortgage brokers about rent to own.
How Rent-to-Own works
Rent-to-own is a method to achieve homeownership that was designed for people who could not get a mortgage either because they had poor credit, or because they did not have enough money for a down payment on a home.
The way that it works, is that the renter/buyer makes an agreement with the landlord/seller to rent a home for a set period of time, after which they intend to purchase the home. In addition to rent, the renter/buyer pays an additional fee which will eventually be counted toward their down payment. In a sense, it is like a forced savings program.
Because of the agreement that is in place, the renter/buyer has a set price that they may purchase the home for and they do not have to worry about fluctuating markets.
Unlike regular tenants, tenant buyers are usually responsible for their own repairs and maintenance however they can also make renovations, hang pictures, paint walls, etc.
Are There Any Downsides to Rent-to-Own?
The biggest potential downside is that a tenant/buyer might still not qualify for a mortgage at the end of their lease. If this happens they are out the extra fees that they paid plus any maintenance costs that they put into the property.
For this reason, anyone considering rent-to-own should sit down with their mortgage broker or financial advisor and see whether it makes more sense to rent-to-own or whether they should simply rent until they can qualify for a mortgage of their own.
If you do decide to rent-to-own, you should have a strategy to build up your credit and save for a down payment.
As rent-to-own continues to become more popular for Canadians to finally reach their goal of becoming homeowners, many will find this tool to be very effective. Nevertheless, every situation is different, so it may or may not be the right tool for you.
If you would like to learn more about your options for getting a mortgage, call the team at Matrix Mortgage Global today at 1-877-597-2605.