Rent-to-own homes are properties that you can rent for a certain amount of time and buy before the lease expires. It’s basically a way to “secure” a home you like even though you don’t have enough money to buy it yet.
Rent-to-own homes also work for those who can’t get a mortgage approval yet have enough money to afford the house.
But that’s only the tip of the iceberg when it comes to rent-to-own homes. Here’s a more in-depth look at how it really works in real estate.
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Rent-to-Own: How It Works
You can find properties that allow rent-to-own options. Or you can also try to negotiate with a seller to allow you to enter into a rent-to-own agreement. But if they don’t agree, there are also companies that buy the home for you while you enter into a rent-to-own agreement with them.
A rent-to-own setup has two sets of contracts. The first one is the standard lease agreement. This is where you can find details about your monthly rate. It’s also where the landlord’s rules for the property will be laid out.
The second one is the rent-to-own contract. If you go with a lease-purchase agreement, you’ll find it stated here that you have to buy the house before your lease expires. Whether you’re paying in full or getting approved for a mortgage is up to you. The important thing is that you’re required to buy the house.
If you go with a lease-option agreement, you have the option to buy the property before your lease expires. That means you’re not obligated to buy the property once your lease ends. You can walk away from the deal if you end up not wanting to buy the house anymore.
Always read and understand everything—especially the fine print—stated in your contract. If you fail to comply with the terms of your contract, you might lose your rights to the property.
If you want to make sure everything’s good, ask for assistance from a real estate agent and/or attorney.
Benefits of a Rent-to-Own Deal
Here are some of the benefits that a rent-to-own deal can give you:
- You can immediately move into the house even though you can’t afford it just yet. Just don’t forget that as a tenant, you still have to abide by the landlord’s rules.
- It gives you time to save up for a down payment. Monthly rents are usually cheaper than the monthly amortizations of a mortgage. You’ll have more time to save up and get your finances in check. That means while renting, you can also fix your credit standing to get mortgage approval.
- The best thing about a rent-to-own deal is that you get to build equity in the form of rent credits. A portion of your monthly rent goes into rent credits which can then be deducted from the final price of the home when you buy it.
- A rent-to-own deal is a perfect midpoint for buying and renting. It’s more manageable than buying a house right away since you won’t have to pay a large sum of money upfront. And it’s more worth it than just renting since you also get to build equity and eventually own the home once the lease is up.
Rent-to-Own vs. Buying
Rent-to-own requires a smaller down payment than buying a home. It comes in the form of a non-refundable initial option fee which is usually 1–5% of the total purchase price. This works as some sort of a deposit or reservation fee so that you can lock in the home until you have the financial capacity to buy it.
But while that’s tempting, it’s still important to note that buying a home will be less expensive in the long run. The only additional amount you’re paying besides the house price is the interest. In rent-to-own, you’ll have to pay rent for about 1–5 years and then your mortgage after.
Also, buying gives you the freedom to do what you want with your house—because it’s yours. You won’t have to worry about rules set by a landlord as you would in a rent-to-own setup.
Rent-to-Own in Canada

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So, what is rent-to-own? It’s a way to build equity for a home without the stress of saving up for a large down payment and paying monthly amortizations for your mortgage. It’s the best way to “reserve” a home you love while you come up with the money to pay for it.
To recap, here are the benefits of a rent-to-own deal:
- You can move into the house immediately even though you’re still saving up to buy it.
- You can fix your credit score or save up for the down payment while renting.
- You get to build equity for the home and own it after the lease expires.
- You can manage a rent-to-own deal better than you could manage to buy a house. It’s also more worth it than just renting and getting nothing to your name once the lease ends.
There are a lot of options for rent-to-own in Canada. Companies offer rent-to-own packages with very affordable down payments. Having a mortgage broker on your team, apart from your realtor and lawyer, makes the whole process more manageable, especially if you’re a first-time homebuyer.