Rising prices, shorter amortization, tougher lending rules and now a tiered down payment scale (Canada) are making things so much tougher for anyone (not just the first time homebuyers) to get into the housing market (or stay in the housing market) these days.
Forget that life as we know it today includes debts, credit issues, inflation and likely smaller salary increases then we would like to see, it is no wonder that more and more people are being forced into renting or, ahem… moving in with family and friends.
So where does that leave you if you DON’T want to rent again or at all… and have zero interest in moving back home.
Rent to own can help you but does it fit your current situation and needs? It does if what you need is TIME to sort out your shortfalls.
Here is a list of the types of situations where rent to own can definitely be of benefit:
1. Have bad or poor credit (due to health issues, divorces etc)
Rent to own gives you buyers the time needed (and in many cases, the support needed) to repair your credit so they can qualify for the mortgage at the end of the rent to own term.
2. Have no credit history (students, new immigrants)
Like above, buyers have the time in a rent to own to establish their credit history
3. Not enough of a down payment for a traditional mortgage
Again, the theme here is time. Pick the house wanted today but save up the down payment over the rent to own term so the buyer can qualify for the mortgage at the end of the term (many rent to owns have a forced savings component of their monthly payment where that amount is directed towards the down payment on the house each month)
4. Bankruptcy or Consumer Proposal
Chances of getting a mortgage after either of these situation is zero to none. Rent to own can offer buyers who dealt with either credit burning issues the chance to get back on track in their own home while they repair and re-establish their credit history
Offers buyers who are self-employed the time to report their income and taxes to enable that income to be used to qualify for a mortgage. In many cases, lenders want to see a minimum of two years reported income that would allow the buyer to qualify for the mortgage
6. Face Risk of Foreclosure or non-renewal of mortgage on current home
Buyers that have fallen behind on payments and run the risk of losing their home can use rent to own as a bailout. An investor can purchase the house from them and rent to own it back to them (possibly at a lower monthly payment- especially if the buyer had a high interest rate or was trying to get out from under a 2nd mortgage). We have seen this strategy work very well for many home owners who were not in a position to catch up with the bank directly