Why Rent To Own? – Sometimes people are in difficult situations with their credit that prevents them from a) purchasing a home or b) keeping the home they already have. Occasionally we have people come to us for optimum mortgage and we are simply not able to get one for them in any of the conventional ways so we offer them rent to own.
Scenario #1 – Our client would like to get on the property ladder but has very poor credit with large debt and/or no down payment. Scenario # 2 – Our client has a home and a mortgage. The mortgage is due for refinance and the client can no longer qualify for a mortgage due to very poor credit and large debt and will lose the home. Scenario # 3 – Our client has a home and a mortgage, the mortgage is not due but the client has debts which are going or have gone to a collection agency and the client is going to lose the home. Scenario # 4 – Our client has a home and a mortgage, has fallen on hard times and has been unable to pay the mortgage and is going into foreclosure and will lose the home.
Scenario # 1 – The Rent to Own company reviews the client’s ability to pay a monthly “rent” payment and if it looks viable the process can proceed. An investor is found who will buy a house and rent it to the client for a specified period of time after which the client buys the house from the investor. This house is one of our client’s choosing within a specific price point, so that in the end our client is buying the house that he really wants. The monthly payment is set up so that a portion of it is held in an account and at the end of the contract period the client uses that portion as a down payment to buy the house from the investor. The investor makes money on the investment when at the end of the contract he has a buyer in place (the client) who will buy the property at a price agreed upon when the contract is set up. Our client, who has had time to repair his credit, can now qualify for a mortgage and then becomes the owner of the house he wants to own.
Scenario # 2 – An appraisal is done on the property and an investor is found who is willing to buy the house for the appraised value from our client. The client’s debts are paid from any equity in the home and then the client remains in his home, paying rent as in scenario 1 in such a way that at the end of the contract period the client has a down payment to be able to buy his house back from the investor. By this time his credit is repaired to the point where he now qualifies for a mortgage.
Scenario # 3 and Scenario #4 follow the same pattern as Scenario #2. The key to all of the above is that the client’s credit is repaired to the point of qualifying for a mortgage at the end of the contract period. If not then the client forfeits the house and the accumulated funds held for the down payment. The client also agrees to undergo credit counselling and having his credit checked regularly over the course of the contract. The investor wants to make sure that he has a qualified buyer for the house at the end of the term. We will also recommend a debt settlement company to reduce the amount of the client’s original debt as much as possible. The house must be kept in good repair. Our client will only be responsible for the rent payment, taxes and insurance will be the responsibility of the investor. This is a good solution for those who would otherwise not be able to become home owners or who might be about to lose the house that they love.
Gord Davis works with the best Rent To Own companies in Ottawa and whole Canada and can help his clients by setting them up with the one that best meets their needs for their location.