Rent-to-Own; Is it right for you?
Home ownership, to most, is an essential part of their life goals, and financial security! Sometimes, for various reasons, people are held back from this dream because they can’t qualify for a traditional mortgage. Instead of being trapped in a cycle of renting, choosing to enter a rent-to-own agreement is one solution that can help such individuals obtain the dream of home ownership.
So what is a Rent-to-Own agreement?
It is a contract under which the applicant(s) selects a home and an investor purchases it. The applicant then rents the home from the investor and signs an “Option to Purchase” agreement. This allows the applicant the exclusive right to buy the home for a pre-set amount after a certain period of time. The applicant(s) will usually only pay 2-3% down payment.
Typically applicants for Rent-to-Own tend to fall into one or more of the following three categories:
Little or Poor Credit
- • New federal mortgage regulations have made it tougher for Canadians to get approved for mortgages. Even if you haven’t abused your credit, it is possible that you simply don’t have enough credit because you haven’t borrowed much in the past. If you have insufficient credit, traditional lenders will often require a much larger down payment – somewhere in the realm of 25-30%. But for the average person, this just isn’t realistic.
Inconsistent Employment Record
- • If you are self-employed and your earnings vary from month to month, a commissioned salesperson, or maybe you are newly hired, getting a mortgage can be much harder and a Rent-to-Own scenario may make more sense until you have consistent proof of income.
Don’t Have a Down Payment
- • Saving a down payment can be difficult. Many families may find it easier to save if they are part of a forced savings plan that a Rent-to-Own agreement involves.
If any or all of the scenarios above sound like you, then Rent-to-Own might be the right option for you. Like other types of mortgages, you can be pre-approved for a certain amount so you will know what price range you need to look for when you go house hunting.
If you require more information, or want to get started, contact me any time!