If you have had trouble qualifying for mortgages in the past, you may be thinking about rent to own. But it may be unclear to you how this type of process works. In this blog we will explain in basic terms how rent to own works so that you can make a decision as to whether this might be the right choice for you.
What is rent to own?
In its simplest terms, rent to own is a program by which a tenant-borrower rents a home from a landlord-lender with the intention to eventually purchase the home. A portion of the monthly rent gets credited toward the down payment on the home. The idea behind rent to own is that it provides a way for those with poor credit to eventually achieve their dream of home ownership.
Rent to own agreements
In a rent to own situation, there are two agreements that will be put in place. The first is the “option to purchase” agreement and the second is the “lease agreement”. It is always advised that you receive independent legal advice before signing these contracts.
In most cases, the tenant-borrower will have a lease term of three to five years which should give them plenty of time to build up their credit to the point where they can be approved for a mortgage. If you do not think you can build up your credit within this timeframe, then rent to own may not be the best choice for you.
With the option to purchase agreement, you will have the option to purchase the home once your lease term is done. Your landlord will be legally obligated to sell you the home if you decide that you want to buy it. The purchase price and timeframe that you have to buy the home will all be stated within your option to purchase agreement.
If you have a goal to purchase a home within the next few years but poor credit has become a stumbling block, then rent to own can be a great way of helping you fulfil your dream of becoming a homeowner. If this sounds like an option you might be interested in, then contact the team at Akal Mortgages today to speak with one of our mortgage advisors. We can be reached at (416) 621-1300.
When we say YES! We stand behind our promise®™