With a rent-to-own arrangement, you can rent a home and also have the option to purchase the home in the future. You can enter a rent-to-own arrangement with individual landlords or rent-to-own companies. Similar to any rental agreement, you will make monthly rent payments to the landlord or rent-to-own company; however, a portion of the payments will be saved up and will eventually be applied towards the downpayment of the home at the time of purchase.
Rent-to-own can be an option to consider for interested buyers who don’t have enough downpayment saved up right now. Buyers who were refused a mortgage due to bad credit scores may also get into a rent-to-own arrangement and work on repairing their credit scores during the lease period. In fact, some rent-to-own companies also offer credit repair programs for such buyers so that they can be approved for a mortgage at the end of the lease period.
There are several rent-to-own companies operating in major cities of Alberta, including Calgary and Edmonton. Very few rent-to-own companies operate nationally, with most companies operating in a particular city or region. A simple search on the internet, with prompts such as ‘rent-to-own homes near me’ or ‘Calgary rent to own,’ can help you find rent-to-own companies operating near you. Some rent-to-own companies operating in Alberta are listed below:
| Rent to Own Calgary | |
|---|---|
| Requity Homes | Real Suite Assets Inc. |
| Peak Housing Solutions | ASAP Housing Solutions |
| Royal Rouge Properties | |
| Rent to Own Edmonton | |
|---|---|
| EP Homes | Requity Homes |
| 911Homes | QD Home Quest |
| Chilkoot Homes | Royal Rouge Properties |
Researching a rent-to-own company thoroughly before entering into an agreement with them is very important to protect yourself from rent-to-own scams. Many reputed rent-to-own companies are a part of the Canadian Association of Rent to Own Professionals (CAROP), which is a professional association of rent-to-own professionals. It should also be noted that there are no rent-to-own programs offered directly by the Canadian government.
To get the option to purchase the rental home, the rent-to-owner must pay an upfront non-refundable fee to the landlord. This fee, known as the ‘ option fee ’ or the downpayment, is usually 1% to 5% of the agreed-upon purchase price of the home. However, depending on the tenant’s financial situation, they may have to pay a higher option fee. If you end up purchasing the home, the option fee is applied to the purchase price of the home; however, you will lose this deposit.
Rent credits are the portion of the monthly rent payment that is set aside for the downpayment of the home at the time of purchase. Rent credits often form 25% or more of the monthly payment but can be more or less based on the unique case.
The amount of option fees and rent credits can be higher depending on the individual case. For example, if the tenant has declared bankruptcy and is looking to repair their credit, the rent-to-own company may ask them to pay an upfront fee of 10% and charge higher rent credits to save up at least 20% downpayment through the option fee and rent credits. Doing this can improve the chances of their mortgage approval at the end of the rent-to-own program.
There are two kinds of rent-to-own agreements possible,
Suppose you want to buy a home listed on Calgary’s housing market for $380,000 but don’t have enough downpayment saved. You decide to enter a rent-to-own agreement with a rent-to-own company for two years. Then, the agreement details would look like this -