What is Rent to Own Program?
Rent to own simply means that you rent the home with an option to buy it within a pre-defined period of time. The deal involves an ‘Option to Purchase Agreement’ plus an Occupancy Agreement.
The future purchase price of the home is set in the agreement as well making it a long-term rent plus mortgage hybrid combination.
There are many other names for ‘Rent to own’ program including lease option, lease to own, rent to buy or lease purchase.
Advantages of Rent to Own Homes
There are numerous advantages of rent to own homes compared to traditional lease concept.
But the biggest benefit is we say ‘Yes’ to our clients when the banks have refused their application. The prime advantages of this program include:
- Significantly lower down payment
- Monthly option credits help build equity
- Building improvements create real sweat equity
- Avoid high closing costs
- Safeguard against home price inflation
- Get time to repair credit score
A Typical Deal
Rent to Own Homes – A Typical Deal Example
Let’s assume the classic tenant case. He has been living off rent for all his life due to convenience and other budget considerations. In his mid 30’s he has probably lost thousands of dollars in rent. But he now has a good income and a stable job. But over the years, he hasn’t been able to build a good credit rating. Average credit rating of such tenants is in the mid 500’s or below average. But now, he wants to live in his own dream home. Below average credit score means that most of the banks and traditional lenders have rejected his mortgage application. For example, most people hunting for GTA homes for sale usually end up being rejected by banks due to tarnished credit rating. This is where rent to own homes programs kick in.
Tenant’s Maximum Monthly Payment = (Monthly Income/3) – Property Taxes – Misc. Charges
For Example, if your monthly income is $7,000 then as per the formula,
Max monthly Payment – ( $7,000 / 3 ) – $70 Misc Charges – $150 property tax = $ 2113 / Month
This means that you can afford $2,113 per month house.
Total Debt Service Ratio (TDS) – This is the payment you can afford to support your payments for your dream home. Banks and leading financial institutions consider around 40% TDS for credibility and approval.
TDS = Monthly Total Debt / Gross Monthly Income
Assuming your monthly expenses = $2,113 (House Rent) + $550 Monthly Expenses = $2,660
Now, TDS = $2,660 / $7,000 = 38%
Since, tenant’s TDS comes under 40%, most banks would simply approve the home loan application, provided the credit is good. If the credit score is not good, the banks will reject the mortgage loan.
Now, after being rejected by the banks, we suggest you try a rent to own homes program. Most of the below 40% TDS cases achieve success with our rent to own home program. In most probability, if your chosen home has a rent in close proximity to $2100, you can dream of owning the home. Add the advantage of generous rent credit and the tenant will have enough at the end of 2-3 years lease period for mortgage closing.
- Rent to own homes Toronto
- Rent to own homes Oakville
- Rent to own homes Brampton
- Rent to own homes Barrie
- Rent to own homes Kitchener
- Rent to own homes Ancester
- Rent to own homes Hamilton Mountain
- Rent to own homes Mississauga
- Rent to own homes Cambridge
- Rent to own homes Stoney Creek
- Rent to own homes Guelph
- Rent to own homes Brantford
- Rent to own homes Clarington
- Rent to own homes Waterloo
About Rent to Own
We not only provide rent to own solutions, but also our expertise, knowledge and most importantly, our honest partnership experience. Our reliable rent to own homes program is designed with YOU in mind. The transparent process offers greater chances of success. We provide genuine guidance, set realistic expectations and find the best deals suited to your financial stature.
Along with our mortgage brokers, real estate partners and credit specialists, ‘Renting To Own’ work with you to get you the most appropriate deal. We match your budget with your expectations. Our lease to own programs help improve your credit and offer a positive environment to build on the success of home ownership. We provide incentives so you can build genuine home equity and get on the path to financial bliss.