Given Ontario’s escalating cost of living and real estate prices, renting with the potential to buy is attractive to some would-be homeowners. This is particularly true for those who may not yet be financially stable enough to make a large down payment or have stellar credit.
If this is something you’re considering, there are a few things to keep in mind before making a final choice.
Make sure you’re familiar with the lingo. If you want to rent with the option to purchase a house from the rent-to-own business down the road, you’ll need to be prepared to pay a charge (sometimes called an option fee, option money, or option consideration) to the rent-to-own firm. This cost is normally between one and five percent, however it might be more or lower depending on the circumstances.
Tenant contributes a percentage of their monthly rent to this charge and to a possible down payment on a future mortgage.
Rent-to-own contracts may be split into two categories: lease option and lease purchase. When in doubt, a lease option contract is the safer and better alternative. Since there are no commitments involved in buying the house at the conclusion of the lease, if you change your mind about buying the house you may just vacate the premises. If you have a lease purchase agreement, however, you must purchase the property at the end of the lease or face steep penalties.
Regardless of the nature of the agreement, it is important that all of the details, such as who will pay for property taxes and who will handle necessary repairs, be spelled out in detail. The absence of conflicts in the future may be attributed to the existence of this written agreement.
Be thorough in your research. Get a second opinion on the property’s value. This can help you determine whether the home’s asking price is reasonable, given the market conditions in the area. In addition, before committing to a property, have an impartial inspector look it over to make sure there are no big problems lurking under the surface.
In addition, I suggest that you check the property taxes and references of the rent-to-own organisation. Verify their ownership of the property by requesting a title report from the local register office, and see whether they have a history with the Better Business Bureau.
Do some mental math. Determine how much of your monthly payment will go toward the down payment. Don’t forget to include in the cost of any repairs or upkeep you’ll be responsible for, both during the lease term and after you’ve taken ownership.
Talk to a lawyer who is licenced to handle real estate matters. They will be able to advise you on your obligations and risks, lead you through the agreement and title report, and answer any concerns you may have.