For young Albertans who have been struggling with the tough economy but want to buy a home, rent to own may be a great option. Rent to own, also known as lease to own or lease option, is a leasing agreement that provides the tenant with an exclusive opportunity to buy their home after a set amount of time.
This sort of agreement makes a lot of sense for many Albertans. Perhaps you have a baby on the way and just got a great new job. While your employment history may not satisfy the needs of lender now, they will when your lease has finished and you have the option to buy your home. Similarly, Albertans whose credit isn’t as good as it could be will likely benefit from the lenient requirements of renting. Once the leasing period is done, you will still need a good credit score to qualify for financing, but the price of purchase will have been determined at the beginning of the lease, and you’ll have had the time your need to repair your credit score.
The person hoping to rent to own the home will pay an upfront fee — usually around 2 – 2.5% of the house’s purchase price. This fee will secure the tenant the exclusive option to buy the home in a year or two or three. What this means is that the seller will not be allowed to market or sell the home to anyone else at the end of the lease, and the purchase price for the house will be the same as the price determined at the beginning of the lease, but the tenant does not have to buy the home if they do not want to.
During the renting period, the tenant will pay rent but also contribute extra money towards the down payment. This extra money should, at the end of the leasing period, equal the 5% of the purchase price and serve as the down payment for the home.
Renting to own is a great option for many Albertans. If a seller is willing to provide a tenant-buyer with the choice to rent to own, that’s great. But we recommend caution to both sellers and buyers. In particular, be careful of middlemen who report to make the rent-to-own process simple and stress free. While there are undoubtedly some great Canadian rent-to-own companies that are simply trying to help, some are scam artists who will disappear as soon as you’ve paid the fees.
At Source Mortgage, we work with a few lenders who are happy to consider financing rent to own cases. Since the tenant-buyer will need to secure financing to buy the home, working with a lender who is familiar with these sorts of deals can help to make the process go more smoothly. Assuming your seller is okay with the rent-to-own structure and you qualify as a borrower, these lenders may be a good option for you.
If you have any questions about how rent-to-own works or how it could benefit you, contact the Mortgage Experts at Source Mortgage today!
Source was absolutely great to work with - went above and beyond to help us get everything done when buying our new home. Highly recommended!! Chad and Jenelle Richards Jan 09 2013
Chad and Jenelle Richards
Added January 23rd 2013
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