Are you intrigued by rent to own as an alternative to the traditional mortgage route to homeownership?
It’s no secret that the rate of homeowners has gradually declined. At the same time, the number of renters has been on the rise, and their growth rate is more than double that of homeownership.
The big question is, are you looking for a new home?
Are you encountering difficulties finding a lender or meeting the qualifications for a mortgage?
Well, we’ve got you covered!
Many Canadians in your shoes are switching from traditional mortgages to rent to own agreements. If you dream of owning your own home but can’t quite swing a mortgage right now, rent to own could be the answer.
Stay with us as we explore the differences between rent to own and traditional mortgage agreements.
So, what exactly is rent to own?
Well, it’s gaining popularity among Canadians looking to secure their piece of the housing pie. In a competitive housing market where many hopeful buyers fall short, rent to own offers a lifeline to homeownership.
Here’s how it works: You and the property owner agree upfront that you’ll rent the property for a set period. Then, at the end of that agreed-upon timeframe, you can purchase the property at a predetermined price. This gives you the time you may need to get your financial ducks in a row and eventually secure a mortgage.
Now, let’s dive into how rent to own differs from a traditional mortgage. When you go the mortgage route, you pick out a property you want to buy, and the mortgage company requires certain things to approve your loan, such as a down payment, a solid credit score, credit and employment history, and an appraisal of the property.
The aim here is for the mortgage company to minimize their risk by ensuring they’re lending to someone with a good credit history who can make those monthly payments. Unfortunately, these requirements can be pretty stringent, and the down payment can be substantial, making it a tough hurdle for many potential buyers.
But don’t lose hope! If you don’t currently qualify for a mortgage, the rent-to-own option offers you a chance to work on your financial standing. After renting, usually 3 to 5 years, you should be in a much better position to buy the very place you’ve been calling home.
Some rent to own agreements even give you the choice to buy at the end, while in other contracts, you commit to buying upfront when the agreement concludes.
So why should you consider rent to own over buying outright?
The reality is that rent to own opens up a pathway to homeownership for individuals who might not have that opportunity otherwise. If you cannot secure a mortgage due to being self-employed, having tax arrears, or having a less-than-perfect credit history, rent to own provides a valuable chance to work toward owning a home.
Now, let’s talk logistics. In a rent to own agreement, you can purchase the property when the contract expires. You agree on a price for the property at the end of the agreement, and often, a small down payment is required upfront. Alternatively, you might pay the fair market rent for the property, with an additional portion going toward creating a down payment when the sale finally happens.
Conversely, when you go the traditional mortgage route, you must have a down payment and meet the necessary credit requirements to secure the loan. While you become a property owner immediately, you must also immediately qualify for the mortgage. Plus, in a rent-to-own scenario, you get to know the property intimately before committing.
So, what are the advantages of rent to own? It gives potential buyers the time they need to get ready for homeownership. If you have less-than-perfect credit, this arrangement allows you to work on improving it while still putting your money toward your future home. Plus, you can save for that down payment without the pressure of massive mortgage fees.
On the other hand, the most significant advantage of a traditional mortgage is that you become a homeowner right away. You get to build equity in your home immediately and enjoy potential tax benefits.
Now, rent to own might be a new concept for some it’s here to provide opportunities when traditional mortgage lenders have said no. To make the most of this option, it’s essential to work with a reputable rent to own company that understands the market and helps you find the perfect property that can eventually become your very own dream home.
In summary, understanding the differences between rent to own and a traditional mortgage can be an eye-opener. Rent to own companies are helping more people achieve homeownership, offering an alternative to renting indefinitely. If you’re eager to explore your options, we’re here to assist you on your journey to homeownership.
Learn more about rent to own and discover how it can be the key to making your homeownership dreams a reality! To find out more, take a look at our Path to HomeOwnership Program here