How rent to own homes works in Canada

Home ownership is a key life goal for many, but with home prices in Canada averaging over $685,000, the number of people who are able to buy is decreasing. That's where rent to own programs come in; these plans can help those wishing to get on the property ladder, but who are unable to qualify for a mortgage, or save money sufficient for a down payment. One crucial aspect of a successful rent to own agreement is your rent to own partner - the company who provides the rent to own program and thereby enables access to the property market. There are many rent to own companies across Canada, so to help you find the right one for your situation, we have distilled the competition into the below table. The companies named here are the very best, most reputable and trustworthy in the rent to own industry. Take a look at their details in brief, or click on their link to delve into their products in depth. And to find out everything you need to know about renting to own in Canada, read our definitive guide on the subject, below.

Why we list no providers here

The sector has operators who take a non-refundable option fee and a rent premium from people who were never going to qualify for the mortgage at the end. Listing companies means vouching for them, and we are not in a position to verify which are which. This page explains how the arrangement works and what to check, and points to a mortgage broker instead.

Common questions

How does rent to own actually work?

You pay an option fee up front, typically a few percent of the purchase price, and a monthly rent above market, with the premium credited toward your down payment. At the end of the term, usually two to three years, you have the option to buy at a price agreed at the start.

What happens if I cannot get a mortgage at the end?

You lose the option fee and every dollar of rent premium you paid. This is the central risk and it falls entirely on the tenant. Before signing anything, get a mortgage broker to tell you honestly what it would take to qualify in two years.

Is the purchase price fixed at the start?

Usually yes, which cuts both ways. If prices rise you benefit; if they fall you are committed to a price above market or you walk away and lose what you have paid.

What should I check before signing?

Who holds title during the term, what happens if the owner defaults on their own mortgage, whether the option fee is refundable in any circumstance, and whether the credited premium is documented in a way a lender will accept as a down payment.

Can I buy a house in Canada without a mortgage?

A rent to own agreement can help you to work towards property ownership, and does not require a mortgage at the outset. However, you will need to be able to secure a mortgage by the time you come to the end of the rental term, in order to source the funds needed to buy the home. Mortgage approval is a stumbling block for many who choose the rent to own path, but by making rent to own payments regularly, you are improving your credit, increasing your chances of mortgage approval, and becoming eligible for better mortgage rates. And remember that mortgages are available from many types of lenders, including private lenders, who may not have such rigorous eligibility criteria.

What is the minimum down payment needed to buy a house in Canada?

The CMHC requires a minimum 5% deposit to buy personal property in Canada; but a rent to own agreement can provide earlier access to the housing market, as it does not have this threshold. Most rent to own companies require somewhere between 2% and 5% for a down payment at the start of the contract - though some companies do not require any down payment at all. However, you will need to have sufficient payment saved by the end of the lease (including rent credits) to meet the 5% CMHC threshold needed for a mortgage.

What are the income requirements for a rent to own property?

This depends on the value of the property; rent to own companies will want to make sure you'll pass a mortgage lender's affordability tests when you come to apply for the mortgage needed to purchase the home. The higher your income, the more you'll be able to borrow via a mortgage, and the higher value a property you'll be able to secure a rent to own agreement for.

What credit rating do I need to rent to own?

Credit is not a major issue for those seeking a rent to own rental contract; income is instead a much bigger consideration.

Can I rent out my house without telling my mortgage lender?

No. Most residential mortgages require you to inform them of any changes in circumstance, including if you rent out part or all of the home. This is true even if you offer free rent occupation to someone.

What happens if I choose not to buy the rent to own home?

That depends on what type of rent to own contract you have. In a lease option contract, you can walk away from the property, losing your rent credits in the process, but not penalized in any other way. If you have a lease purchase contract, you are legally obligated to purchase the home, and can face serious consequences if you do not exercise your option consideration.

Can I get a rent to own agreement if I have a past consumer proposal?

Yes, probably. Poor credit is a common reason people are unable to secure a traditional mortgage right away; it takes time to rebuild a credit score - especially after a bankruptcy or consumer proposal - and rent to own is one way to do this, while saving towards a home. But you need to make sure that the steps you plan to take during your rent to own rental term are sufficient to increase your credit enough to meet mortgage lender's criteria, by the time the lease expires.

Why is a lease purchase contract riskier than a lease option contract?

Lease purchase contracts can be considered riskier than lease option contracts, because they legally obligate the tenant to purchase the home by the end of the rental agreement - regardless of circumstances. This means the tenant does not have the flexibility of an option consideration. Successful agreements for rent to own work when the tenant is informed about their choices, and makes the one that best suits their particular circumstances.