Rent-to-own homes, also known as lease-option or lease-to-own homes, are an appealing housing option for Canadians looking to buy a home. These types of homes allow renters to live in a property while they work on improving their credit or saving for a down payment, with the option to purchase the home at the end of the lease period. However, many people have questions about this type of housing option and its specifics. Here, we will list and answer the 10 most frequently asked questions (FAQs) about the rent-to-own housing industry in Canada.
1. What is rent-to-own housing?
Rent-to-own housing is a type of agreement where a renter can live in a property while they work on improving their credit or saving for a down payment. At the end of the lease period, typically three years, the renter has the option to purchase the home at a pre-agreed price. This type of housing option is beneficial for renters who may not currently qualify for a traditional mortgage, but wish to become homeowners in the future.
2. How does rent-to-own work?
In a rent-to-own agreement, the renter pays a predetermined monthly rent, which will include a portion of the rent being applied towards the down payment credit. The renter will then have the option to purchase the home at the end of the lease period, typically three years, at a pre-agreed price. This allows the renter to save for the down payment and work on improving their credit score during the lease period, making them more likely to qualify for a traditional mortgage by the end of the lease period.
3. Who is eligible for rent-to-own housing?
Rent-to-own homes are often a good option for renters who may not qualify for a traditional mortgage. Renters can use the time during the lease period to improve their credit score, save for a down payment, or address any other issues that may be preventing them from obtaining a traditional mortgage. However, it’s important to note that rent-to-own may not be available in all areas, so it is important for buyers to research their options in their desired location.
4. What are the benefits of rent-to-own housing?
Rent-to-own homes offer more stability and flexibility than traditional renting. Those who choose to enter a rent-to-own agreement are able to establish roots in a community and may even be able to make improvements to the property, such as painting or landscaping, that can increase its value. Additionally, rent-to-own homes can provide an opportunity for renters to become homeowners who may not qualify for a traditional mortgage.
5. Are there any downsides to rent-to-own housing?
Rent-to-own agreements may not be available in all areas, so it is important for buyers to research their options in their desired location. Additionally, rent-to-own homes may require a higher down payment or higher monthly rent payments than traditional rental properties. It is also important to note that rent-to-own agreements are typically more complex than traditional rental agreements and it is important for both the renter and the homeowner to fully understand the terms of the agreement before signing on.
6. How much of the monthly rent goes towards the down payment?
The amount of the monthly rent that goes towards the down payment is typically predetermined between the renter and JAAG Properties. JAAG Properties will determine the amount needed to save enough credit to build the renter’s down payment. It’s important to agree on this amount before signing the rent-to-own agreement, to ensure that you are comfortable with the amount being set aside each month towards the down payment.
7. What happens if the renter decides not to purchase the home at the end of the lease period?
If the renter decides not to purchase the home at the end of the lease period, the agreement can stipulate that the renter must vacate the property or extension terms. Any option fee or portion of the rent that was applied towards the down payment could be forfeited or a portion returned minus costs associated with selling the home. It is important for both the renter and the homeowner to fully understand the terms of the agreement before signing on, so that both parties are aware of the potential consequences if the renter decides not to purchase the property.
8. Can rent-to-own agreements be broken?
Rent-to-own agreements can be broken, but there may be penalties for doing so. It is important for both the renter and the homeowner to fully understand the terms of the agreement before signing on. This will ensure that both parties are aware of the potential consequences if the agreement is broken. It is also important to consult with legal or financial professionals to help understand the terms of the agreement and potential consequences of breaking it.
9. How can I find rent-to-own homes in Canada?
There are a few ways to find rent-to-own homes in Canada:
- Online real estate listing websites: Websites such as Realtor.ca and Zillow allow you to search for rent-to-own homes in your desired location.
- Rent-to-own companies: There are companies that specialize in renting homes with an option to purchase. These companies may have listings of properties that are available for rent-to-own. With JAAG Properties, the client picks the home based on approval amount.
- Private landlords: Some private landlords may offer a rent-to-own option on a property they own. This can be found through online classifieds or local newspapers.
- Real estate agents: Real estate agents can help you find rent-to-own homes in your desired location. They may have access to listings that aren’t publicly available and can help you navigate the process.
It’s important to research your options in your desired location and consider factors such as price, location, and condition of the property, as well as the terms of the rent-to-own agreement. It’s also advisable to consider consulting with a financial professional to make sure the Rent-to-Own agreement align with your goals and financial situation.
10. What are the differences between renting from a rent-to-own company and a private landlord?
There are a few key differences between renting from a rent-to-own company and a private landlord:
- Structure: Rent-to-own companies typically offer homes that are specifically designated as rent-to-own properties and have a set process in place for the rental period, option fee, and purchase price. However, with JAAG Properties, you can choose any home within the agreed purchase price. Private landlords may offer a rent-to-own option on a home they own, but the terms may vary and may not be as structured as with a rent-to-own company.
- Resources: Rent-to-own companies may have more resources and experience in handling the unique aspects of a rent-to-own agreement compared to a private landlord.
- Flexibility: Private landlords may have a set of terms and conditions that need to be followed, whereas with a Rent to Own company, the terms may be more flexible and open to negotiation.
- Support: Rent-to-own companies may have a dedicated team to support you throughout the process, whereas a private landlord may not have the same level of support.
11. How much of a down payment do I need when renting to own?
We require that you have at least a 3% down payment, as well as an annual household income of at least $100,000.
12. Can I choose my home?
Absolutely! Once your application is approved, you’ll receive a purchase price for your new home. You’re welcome to choose any home within the agreed range. We’re also happy to recommend properties within your price range that will meet your needs.
13. Who owns the property in a rent-to-own agreement?
JAAG Properties becomes the property owner. We purchase the property and you can then rent it from us. You make payments to us each month, which include rent, property taxes, insurance, and savings for your future down payment.
14. Who pays for property maintenance in a rent-to-own agreement?
You are responsible for maintaining your new home. Prior to move-in, we’ll ensure that your new home is inspected by a Certified Home Inspector so that you are aware of any essential repairs and the essential repairs can be completed before you move in.
15. Can I make improvements to my home?
Of course! Unlike in a traditional rental agreement, you are free to renovate, decorate, and make your home your own.
16. Can I qualify if I have bad credit or no credit?
Yes! Our Rent to Home Solution is intended to help you raise your credit score, pay down debt, and generate savings so that you can later qualify for a mortgage. Our team is eager to help you build a more positive financial future!
17. How long is the Rent-to-own term?
Typically, our Rent-to-own terms last 3 years. However, we may offer longer or shorter terms depending on your unique circumstances.
18. What if I don’t qualify for a mortgage at the end of the rent-to-own term?
If you can’t qualify for a mortgage at the end of your term, there are options to extend your Rent-to-own agreement until you can qualify. We designed the program to help you become a homeowner, and we’re dedicated to working with you towards that goal.
JAAG Properties: Supporting You Throughout The Rent-to-own Process
It’s important to thoroughly research and understand the terms and conditions of any rent-to-own agreement, whether it’s with a company or private landlord. It’s also advisable to seek legal or financial advice to make sure that the terms of the agreement align with your goals and financial situation.