What is Rent-to-Own?

The real estate market in Canada is on a never-ending trajectory (so it seems) towards the sky, with no end in sight of slowing down. While this is great news for real estate investors and those already invested in the market, it’s made it difficult for tenants and wanna-be home buyers alike. 

Because of the increasing barrier to entry, tenants and potential home buyers are coming up with alternative ways of living. Some have opted to leave their hopes of buying their dream home or living in a desirable location behind; others have sought out unforgiving loans; others have decided to stay in the rental market. 

However, what if there was a way to have your cake and eat it too?! One potential option is renting to own!

In what follows, we’ll be discussing what rent-to-own is, how it works, what its pros and cons are, and how you might just be an ideal candidate. If you’ve stumbled upon this article, it’s likely something you’d be interested in learning more about. If so, continue reading…

What Does Rent-to-Own Mean? 

In short, rent-to-own is a contractual lease agreement allowing potential home buyers to rent a property at a fixed rate while providing them with the option to purchase the home at a later date. 

Although rent-to-home agreements look a lot like standard rental agreements between landlords and tenants, they aren’t inherently the same. The primary difference, of course, lies within the agreement itself as discussed above; a portion of each monthly lease payment goes towards a deduction in the purchase price of the home should the tenant decide to buy when it comes time.

Just as becoming a homeowner comes with its advantages and disadvantages, so does renting to own. One of the reasons, however, renting to own is becoming so popular is because it doesn’t require an upfront downpayment like purchasing a home does. Instead, it allows tenants to save for the purchase of the home they’re currently renting, while renting…

So, how does it work?! Great question…Let’s get into it!

How Renting to Own Works

A rent-to-own agreement can be looked at as two separate agreements packaged as one. As discussed, the first is a simple lease agreement as if you were renting an apartment. The second is an agreement that outlines the option to purchase at a settled date. 

Of course, as all contracts do, there are several terms and conditions that can apply with a rent-to-own agreement. That’s why it’s important to involve lawyers and/or work with a reputable real estate agency that can hold your hand through the entire process.

For simplicity’s sake, however, let’s keep it, well, simple…

Over the course of the contract, the tenant will pay a small conditional fee, otherwise known as an option deposit, that is later intended to go towards the agreed purchase price of the home. This is the agreement that states that the tenant must pay their rent PLUS the conditional fee in order to save for the downpayment due on the agreed-upon date.

While rent-to-own can be more expensive in the long run, it allows the tenant to save over a longer period of time for a downpayment while only needing to be concerned with the fixed monthly rental payment for the time being. 

The Pros and Cons of Rent-to-Own Homes

As suggested, there are several pros on cons of being a homeowner. Similarly, there are pros and cons to signing a rent-to-own agreement. As illustrated throughout this article, the primary advantage of renting to own is to allow a greater window for savings, ultimately allowing those less financially equipped to, one day, purchase a home. 

Again, while beneficial for those suited for such an agreement, rent-to-own homes don’t come without their disadvantages. With that said, the following is a list of pros and cons of rent-to-own homes…

The Following are the Pros of Rent-to-Own Homes:

  • Can Purchase with Poor Credit/Lack of Savings
  • Provides an Opportunity to Save for Down Payment
  • Allows You to Test Drive the Home Before Purchasing
  • Build Home Equity
  • Flexibility in Living Arrangements 
  • Agree on Purchase Price 
  • No Overhead Expenses or Maintenance Fees  

The Following are the Cons of Rent-to-Own Homes:

  • Can be More Expensive in the Long Run
  • Agreed Upon Purchase Price May be Higher than Future Housing Market Rate
  • Potential for Home to Be Unsuitable 
  • Limits Financial Progress

Before signing on the dotted line as a buyer, it’s important to negotiate and clarify any and all terms and conditions. Because rent-to-own contracts are so flexible, it’s up to you to ensure that all terms fit your criteria of satisfaction. Understanding the above pros and cons can help with that process…

The Final Takeaway

A rent-to-own agreement can be extremely beneficial for those suited to that type of contract, however, it’s not for everybody. Nevertheless, for the right candidate, a rent-to-own home can be the saving grace they’ve been looking for. 

In any case, a rent-to-own home allows prospective buyers to move into a home before purchasing. This, for obvious reasons, comes with a whole host of tertiary benefits. Not only does it allow them to test run the home but it provides them with a window of opportunity to save, improve credit scores, and stabilize their current financial situation. 

If a rent-to-own home is of interest to you, it’s important to consult with a professional and reliable real estate team who knows the ins and outs of rent-to-own agreements. That’s where Home Owner Soon comes into play! 

To learn more, check us out at and don’t hesitate to contact us with inquiries. Our team of experienced real estate professionals are eager to help.