Renting to Own: A Path to Home Ownership

While it’s rare in Canada, renting to own is a financing option for those who struggle to secure a mortgage. Through rent-to-own programs, renters can transition into homeowners during the agreed-upon leasing period.

Many renters pay what is easily equal to or above a monthly mortgage payment but are often denied financing due to a lack of down payment or failure to pass the financial stress test. Renting to own is a path to home ownership that rewards hardworking Canadians who can’t otherwise purchase property.

If you have bad credit or lack significant savings, renting to own can make a lot of sense. Sometimes called a lease-option agreement, you pay rent for the house for the duration of the lease (one to three years, usually), with an upfront fee and additional payments that will go towards the eventual down payment.

House value

Some lease-option agreements state that you will pay what the home is worth at present. Others will do a projection and base the fees on the home’s future value when the lease is up.

The fees are often non-refundable if you change your mind and don’t go through with the sale. So, while this is an alternative path to ownership, it is still a big commitment. Read the fine print to see whether you’d be eligible for at least a partial refund if you did back out in the end.

Repairing credit rating and savings

During the leasing period, you should be saving and doing your best to pay down your debt to repair your credit rating. So, this type of agreement works only for people who can afford to pay a higher monthly rent (with a portion going towards the down payment or being subtracted from total price of the home) while paying down debt in order to repair their credit.

Do your research before signing anything!

If you want to find a house for rent by owner, check out Gottrent.com. Look for rentals with lease options to see if there are rent-to-own options in your area.