Rent/Lease to Own is a lease agreement between the Owner of a property and a Tenant-Owner. Both parties agree on lease payments that will be paid monthly over the lease term, which is usually two  years or more.20% of the monthly lease payments will be credited towards your future down payment which will be used to purchase the home at the end of the lease term.
The Tenant is required to have a minimum deposit of five %  or more depending on the risk. This deposit will be held by the Landlord. With lease to own, you have the option to pick any residential property from the Multiple Listing Service (MLS), based on the amount you will be pre-approved for.
With lease to own, the Investor/Landlord will purchase the home that you desire, and the lease to own program/agreement begins.
At the end of the lease agreement the Tenant has the option of purchasing the home based on a purchase price that has been set in advance. The purchase price will take into consideration of market trends, assuming an appreciation rate of 3-5% each year. As a Tenant you have the option to walk away from the purchase before the end of the lease. However, you will forfeit the monthly contributions made toward the future down payment, and your deposit as well.
When you purchase the home that you have been leasing, standard closing costs apply (Land transfer tax, legal, etc).
Lease to own is an option for you if you have a: Low beacon score due to late payments, bankruptcy and consumer proposal, collection(s) and/or judgment(s), bank or financial institution that will not renew your mortgage, if your home is going into power of sale or if you do not have any established credit.Also the self-employed can benefit from this program as the rules to qualify for a mortgage with CMHC has changed.
If you are new to the country, and do not have a beacon score or credit bureau, you can qualify for the rent to own program if: You have been in Canada for less than 12 months, can obtain a minimum down payment of 10% for salary income, and for stated income 15% down. Home must be in great condition, with the property value of $350,000 maximum. The lease term would be 2 – 5 years. With lease to own, your lease payment and maximum home value that you can purchase is based on your income.
How do you calculate your purchase price?
• GDS is 30% based on combined monthly income
• Gross Annual Income / 12 Months x (.3) =Maximum Lease Payment
• Lease Payment / (.0085) = Maximum House ValueTenant Can Be Qualified For
You are required to have a sufficient income to cover the monthly rent payments.
All Tenants that enter into the Lease to Own program will also be offered the opportunity to enter the BDO Canada New Beginnings credit mentoring program. This will help to ensure that at the end of your lease term your credit will be repaired and that you will be in a position to apply and be approved for a mortgage. This program runs for a period of 24 months that will provide a personal coach for approximately 30 minutes per month for a nominal monthly charge. This will ensure that credit history is being created and a beacon score high enough to satisfy CMHC and lenders guidelines.
Once you have obtained a 650 plus beacon score, you will be able to secure financing through all the major lenders that are available.
In the event that your beacon score does not reach the 650 benchmark after two years, the lease can be extended by 3 or 4 months while your credit continues to improve.
Rent/Lease to own for Investors
If you are thinking of purchasing a rental/investment property…consider the lease to own program.
The lease to own program offers you qualified Tenants that will: have a 5% down payment, pay for all maintenance and upkeep, are carefully screened, and a turn key operation offering a exit strategy as Tenant will own the home at the end of the lease term and a pre-determined price. (Lease term varies from 2-4 years).
If you would like more information on the lease/rent to own program, Please contact us.