How Does Rent To Own Work In Canada?


Rent to own plan is an agreement for home rental. It gives you the chance to buy the property once you have met the conditions. With the increase in Canada’s property rates, it has been difficult for people to buy a house. Another thing that makes buying a house more challenging is mortgage approval. Over time, home loans are challenging to get approved, given the market’s high prices.


In such scenarios rent to own scheme is the best option while looking for a house. With rent to own agreements, you have the option of buying the house once the lease expires. This gives you a stable ground to settle yourself before making a significant investment.


How Does Rent To Own Works?

Rent to own starts with a contract between a buyer and a seller. There are different types of rent-to-own contracts. These include.

      ●      Lease option

      ●      Lease purchase

Lease option:

With the lease option, you have the option to buy the house once the lease expires. However, you are not obligated to buy it. Once you decide not to buy the property, the option to buy it terminates while you can freely walk away from the contract. With the lease option, you have the flexibility of securing your rental payments as the down payment for the house in case you plan to buy it in the future.

A lease document can include the following elements:


Price: The amount you are required to pay for the home if you plan to buy it in the future. This is a fixed amount regardless of the market prices fluctuating over time.

Term: The time you will spend in the house as a renter is mentioned in the agreement. In other words, how much time you have before you make a purchase.

Rent: The amount of rent you are supposed to pay is mentioned in the agreement. This rent could become a part of your down payment once you plan to buy the property.

Lease purchase:

A lease-purchase agreement makes it mandatory for you to buy the house at the end of the contract termination. It could be problematic for you if you are unable to secure a mortgage loan at that time. A lease purchase document includes the same clauses as a lease option but with the obligation to buy the property at the time of contract termination.


Like everything, rent to own also comes with some pros and cons. Here are some of the advantages and disadvantages of renting a house.


Advantages Of Rent To Own:

Purchase option.

As a rent-to-own plan is flexible, you have the option to buy the property once the lease expires. And in case you are not interested in buying, you can cancel the contract since you are not obliged to buy the property.

Bad credit.

If your bad credit score is coming in the way of buying your own house, then a rent to own option might come to your rescue. If you are not qualified for a home loan, then you can buy a house with a rent to own plan. This way, you can work on your credit score over time and then buy your dream house once you can get the loan.

Standard purchase price.

With a rent to own plan, you can lock your purchase amount regardless of how much the property’s value is rising or declining over time. Buyers have the option of backing out if the value of the property decreases over time.

A test run.

You can give the house a test run without entirely having to commit and make an investment. In the meantime, you can become more familiar with the neighborhood and learn issues around the house without the pressure of buying or selling the property.

Flexible living.

With a rent-to-own plan, you have flexibility over the living standard. As a result, You can easily make re-arrangements and renovations around the house.

Disadvantages Of Rent To Own:

Home maintenance.

Your landlord might expect you to make renovations and repairs over time. So make sure to read the contract carefully. Look for any points that might end up costing you more. Ensure that you get a renter’s insurance policy to cover any losses or provide coverage if an accident occurs in the house. In case you need to look for tenant insurance quotes in Canada, head over to Surex to get the best quotes according to your needs.


Price fluctuation.

Price fluctuation is a significant drawback when it comes to renting to own. Both the buyer and seller decide on the purchase price before the lease starts, but if the price ends up dropping, you might have to pay the fixed amount rather than the market price.

Lack of control.

As you do not own the property yet, there might be a significant chance that your landlord will not allow you to make any adjustments. Also, they can end up stop making mortgage payments or force harsh penalties. Make sure to check your contract in advance to avoid legal battles in the future.

Money loss.

If you do not end up buying the house, then you can lose all the extra payments you made in the name of buying the property later. In some cases, you might have to pay the initial fee even if you do not end up buying the house.

Right to purchase.

In some instances, you might lose the right to purchase the property at the end of the lease termination. For example, if you do not pay the rent on time.

Final Verdict:

Regardless of what option you are looking for rent to own agreement allows buyers to move into a house without paying a hefty sum upfront. This can benefit you if you need time to improve your credit score or save for a down payment before buying the property. To make the process run its course smoothly, make sure to contact a qualified real estate attorney along with the real estate agent to clarify all the clauses before you sign the agreement.

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