Rent to Own Programs in Ottawa - How You Can buy a Condo or Home

Not Ready To Buy A Home, But Tired Of Renting? Find Out If a Rent-To-Own Agreement Is Right For You

What Is Rent-To-Own?

A rent-to-own agreement that means you are renting a house for an agreed-upon period of time with the option (or in some cases obligation) of buying it before the rental term is finished. While this may sound simple, a rent-to-own agreement is very nuanced. It is important that you have a clear understanding of the terms and the potential risks associated with it before committing to purchasing a home or condo in Ottawa.

Why Would Someone Rent-To-Own?

A rent-to-own agreement can be an option well suited to someone who is ready to buy a home but who doesn’t have the ability to finance the purchase. Almost anyone buying a home in Ottawa will need to take on a mortgage. To qualify for a mortgage, you have to have a good credit score and a substantial down payment saved. That isn’t always easy or even possible. In this case, a rent-to-own agreement might give you the time you need to save a down payment, improve your credit, and gain access to financing options. In many cases, you can also build up some equity in the home while you work towards buying it. 

A Closer Look At A Typical Rent-To-Own Agreement

The typical rent-to-own agreement is made up of two parts: a lease agreement and an option to buy during or after the rental term.

The Price Of The House

Generally, the purchase price of the house in question is “locked-in” when the rent-to-own agreement is being drawn up. This is in the interest of you, the renter/buyer. It means you know the final price you’ll pay and won’t be faced with any unpleasant surprises.

The Finances Of Rent-To-Own: Deposits and Rent

Typically, as an eventual buyer, you will be expected to pay a 5% deposit towards the final sale price of the Ottawa house or condo. This “earnest money” is seen as an act of good faith. It also gives the seller a sense of security knowing that their tenant has a financial investment in the home from the outset.

Unlike your usual rental agreement, with a rent-to-own agreement, you may be responsible for maintaining the home and property. This may also include paying for any repairs that need doing within the term of the agreement. Knowing the age and condition of the appliances, windows, and the roof is important. Make sure you are very clear about the terms of the lease before committing.

On the brighter side, it is common in a rent-to-own agreement for a portion of your rent (or a predetermined monthly payment over and above your rent) to be applied to the eventual purchase of the home in Ottawa. For example, your monthly rent maybe $1500 with $500 being applied to the purchase price of the house. In this way, you are able to build equity in the home which can be helpful when the time comes to buy.

Lease-Option v. Lease-Purchase

It is important to note that while some rent-to-own agreements give you the option of buying at the end of the term (lease-option) others require you to buy the home (lease-purchase), whether you are financially able to or not.

With a lease-option agreement, if you are not ready to purchase the home at the end of the rental period, you are free of obligation and can simply walk away. With the lease-purchase agreement, if you cannot purchase the home, there could be legal consequences.

This is one point of the agreement that is especially important to have an Ottawa real estate lawyer review in detail.

What Are The Pros and Cons Of Rent-To-Own?

The Pros

As we have seen, one of the biggest pros of renting-to-own is the time it gives you as a prospective buyer. You get to move into a house right away and start building better credit, saving for a down payment, and getting your finances in order. Those are all positive things. Since you would be renting during this time anyways, your money may be put to good use in a rent-to-own agreement. 

Another pro of a rent-to-own arrangement is the “locked-in” price. This can be especially helpful during a time when home prices in Ottawa are rising steadily. While the price may be set higher than the current Ottawa market value at the time of signing the agreement, knowing the purchase price gives you more ability to plan and crunch numbers.

While there are some obvious pros with a rent-to-own agreement, there is a certain level of risk involved, too.

The Cons

While rent-to-own agreements are fairly common in the United States, here in Canada they are much less so. This alone is a good reason to be cautious when considering a rent-to-own agreement. Companies facilitating the sale of rent-to-own homes have been known to fold leaving renters in a very difficult situation. You will want to make sure you are working closely with knowledgeable real estate agents and lawyers who can help to protect you.

Here in Ottawa there are reputable companies that do a great job in facilitating programs such as rent to own for qualifying individuals and families. Complete the form below to get the ball rolling. 

In the case of a lease-option rent-to-own agreement, if you decide not to buy you stand to lose money. The initial deposit you put down towards the eventual purchase of the home is generally not returned. Depending on how the agreement was structured, you may also lose out on the portion of your rent that was being counted towards the home’s purchase price.

Is A Rent-To-Own Agreement Right For You?

Buying a home is exciting and always comes with a certain level of risk. Approaching a rent-to-own agreement as if you were buying the home outright is a smart decision. Have a home inspection conducted and do a title search. Finally, whether you are making an agreement with a company or an individual seller, ensure that any earnest money is held in trust and accounted for. If a rent-to-own agreement seems like a good option for you, and for many people it is, make sure to consult with qualified lawyers and agents before committing to an agreement.

Are you and your family interested in learning more about rent to own programs and if they are a viable option for you? Send me an email, call or complete the form below. I will be happy to reach out to you and send you more information.

Thank you

-Roch St-Georges

Rent to Own Application

Below is our client intake form. Please complete the rental application form fully and we will be in touch with you regarding the next steps and provide you with more information about the rent to own program.