Rent-to-Own Homes in Canada 2024

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With home prices skyrocketing across Canada, purchasing a home is becoming a distant dream for many. In this scenario, programs such as rent-to-own can be helpful in fulfilling the dream of home ownership. With the help of a rent-to-own program, you can start renting a home that you want to purchase with the option to buy it in the future.

A rent-to-own agreement gives you the option to purchase the home you are renting either during or after your lease expires. With a rent-to-own agreement, the landlord is legally bound to sell the home to you and cannot sell the home to anyone else during the option period of the agreement. The option period is the time during which you have the option to purchase the home. A portion of the rent paid each month goes towards the down payment for the home purchase.

Rent-to-own homes can be an alternative for those interested in buying a home but cannot do so in a conventional way, such as those who don't have enough down payment or those who cannot qualify for a mortgage due to low credit scores.

RTO Company	Areas Served	Terms	Minimum Option Fee / Downpayment
Royal Rouge Properties	NS, NB, PE, NL, AB, SK, MB	2 - 4 years	$15,000 for homes up to $375,000 or 4% for homes over $375,000
Requity Homes	Northern ON (Sudbury, Thunder Bay, North Bay, Sault Ste. Marie, SK (Regina, Saskatoon), AB (Edmonton), MB (Winnipeg)	2 - 5 years	2% of home purchase price
Clover Properties	ON, QC, AB	2 - 4 years	$15,000 for homes up to $450,000 or 5% for homes over $450,000
HOS Financial	ON, QC, AB, NS	N/A	Greater of $10,000 or 3% of home purchase price
Rent to Own Homes GTA	ON	2 - 5 years	5% of home purchase price
Fraser Valley Rent 2 Own	Fraser Valley	2 - 3 years	5% of home purchase price
Jaag Properties	ON	2 - 4 years	3% of home purchase price
GVC Property Solutions	BC	2 years on average	From 0% of home purchase price
Homesy	Greater Toronto and Hamilton Area	2 - 4 years	5% of home purchase price

Renting to own a home has two parts — a rental agreement and a rent-to-own agreement. The arrangement works similarly to a rental agreement where you pay the monthly rent to the landlord; however, a portion of the rent goes towards an eventual down payment for the home purchase. The portion of the rent that is set aside for the downpayment is known as a 'rent credit.'

Rent-to-own contracts generally require you to make an upfront payment of 1% to 5% of the purchase price, known as an 'option fee, 'option to purchase deposit,' or a 'downpayment.' This non-refundable deposit gives you the option to buy the home and is applied to the purchase price if you decide to buy the home.

Rent-to-own agreements tend to have a set timeline, which typically ranges between two to five years. You can also lock in a purchase price with the agreement.

Types of Agreements

There are two types of rent-to-own agreements:

• Lease-Option Agreement:Also known as option-to-purchase agreements, you are given the option to purchase the home in the future; however, you are not obligated to purchase the home. This means you can walk away at the end of your lease without any additional penalties.
• Lease-Purchase Agreement:In a lease-purchase agreement, you agree to purchase the home at the end of your lease. Failure to purchase the home, such as if you are not able to qualify for a mortgage or if you have changed your mind, can result in penalties.

Whether you sign a lease-option or lease-purchase agreement, rent credits will be accumulated to be eventually applied toward the principal of the house. Should you choose not to purchase the home, you will lose the rent credit that you have built up and may face penalties depending on the type of contract.

A rent-to-own agreement will include terms that have been agreed upon and will also outline your responsibilities. A typical rent-to-own agreement will contain at least the following items:

• Description of the property, such as the address
• Information about rent, such as the monthly payment amount and the total amount of rent to be paid over the contract term
• Who is responsible for what, such as who will pay for utilities, property taxes, maintenance, and repairs
• Important dates, including the date of possession by the tenant, the last day that the client can exercise their right to buy the home from the rent-to-own company
• The initial down payment amount, also known as the option consideration or advance fee
• The total purchase price, along with rental credits and other credits

Rent-to-own programs can be helpful for individuals and families who want to purchase a home but can’t do so because they don’t have enough downpayment saved, as the rent credits saved through the program are applied to the downpayment of the homes.

Rent-to-own programs can also be useful for those who cannot qualify for a mortgage because they do not meet credit requirements, such as immigrants and those with bad credit. Such persons can work on improving their credit scores over the course of the program so that they qualify for a mortgage at the end of the program. Self-employed individuals who don’t qualify for standard mortgages can also opt for rent to own and save up a sizeable down payment over the course of the program.

While rent-to-own can give you the opportunity to buy when you cannot qualify for a purchase now, it comes with some restrictions compared to purchasing a home outright. The property is still owned by the landlord, which means that you will have to follow the landlord's rules. Violating your lease, such as having pets when your landlord does not allow pets, might mean that your right to purchase agreement will become null and void, meaning that you will lose your option fee and rent credits deposit. Listed below are all the advantages and disadvantages of rent-to-own programs.

While you might be able to negotiate a rent-to-own agreement for properties currently being rented, you can also rent-to-own homes currently listed for sale. Some of the ways you can set up a rent-to-own agreement are as follows:

• A homeowner looking to sell their house might be open to a rent-to-own option since it will allow them to earn rental income or lock in a higher home selling price in a rent-to-own contract.
• Some rent-to-own companies allow you to choose any home on the market that you wish to rent-to-own. These rent-to-own companies will limit you to a certain home price and down payment that you are eligible for. You can then select a home listed on the market within those limits.
• If you use a local rent-to-own company, you may be able to purchase homes anywhere the company allows you to. They may also have their own catalogue of listings, which signifies that these are their investor’s properties that may have a lower down payment requirement or lower fees.

Most local rent-to-own companies only operate within a certain city or region. For example, a search for “rent-to-own homes near me” will give you results from local rent-to-own home companies. However, you aren’t limited to just rent-to-own homes in your local area, as national rent-to-own companies operate throughout Canada.

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