Guide to Rent to Own in Ontario

Renting has become a standard part of life for young Canadians. 

That being said, many young Canadians dislike the idea of renting a property, as they are “paying someone else’s mortgage” instead of putting the money towards their own.

But, what if we told you that there is a way for you to rent a property and put money towards a down payment simultaneously? 

It’s true! All you need to do is enter a rent to own agreement with a landlord or rent to own company.

Continue reading to learn everything that you need to know about rent to own Ontario!

Rent to own Ontario — what is it and why is it important for renters?

Simply put, a rent to own agreement is an agreement between a renter and a landlord or a rent to own company.

The renter pays monthly fees to live in the space (much like a traditional rental agreement), and in return, the landlord or rent to own company puts away a portion of the rent towards a future down payment (for that specific property in Ontario).

At or before the end of the lease agreement, they can use the money they’ve saved (along with loans or other funds) to purchase the rental property for a set price. 

Rent to own agreements make it significantly easier for young Canadians to enter the real estate market, especially in major cities where the market is extremely competitive.

How does rent to own work in Ontario for renters?

Although rent to own agreements are relatively straightforward, there are a handful of important details that renters should know before they enter a contract.

For instance, to enter a rent to own agreement, both parties (the renter and the landlord or rent to own company) must sign two separate documents — a lease agreement and an option-to-purchase contract.

The lease agreement is particularly important as it clearly outlines how long you can rent the property and how much you need to pay each month.

The option-to-purchase contract also lists several important details, including:

• Rental payments methods
• The possession date of the property
• Agreement expiry date
• Whether the tenant or landlord/rent to own company is responsible for the utilities
• Purchase price of the living space
• The portion of the rent that goes toward the property
• Size of the down payment

Be sure to reach out to your landlord or rent to own company if you ever need to clarify any of these details. They can guide you to the portion of the contract that states the correct details.

What are the pros and cons of rent to own Ontario renters should know about?

There are a wide range of pros and cons to rent to own agreements that renters should be aware of before you rent to own a home in Ontario.

Pros of rent to own agreements

Some of the pros of entering a rent to own agreement include:

• Makes it easier for young Canadians to enter the real estate market
• Gives the renter time to save for a larger down payment
• Gives the renter time to fix their credit
• Wide variety of rent to own property options are available in Ontario

Cons of rent to own agreements

Some of the cons of entering a rent to own agreement include:

• You lose the portion of rent that you’ve set aside for a down payment if you don’t purchase to property after the lease expires
• You may not be able to make significant changes or modifications to the property during the rental phase of the agreement
• If the property loses value after you and the landlord/rent to own company have set a fixed price, you will likely not be able to adjust the price when it comes time to buy
• You will lose your right to purchase the property if you break your lease agreement
• You may notice issues with the home after buying the property
• Rent to own scams are commonplace in Ontario

Renters should keep these pros and cons in mind before coming to a final decision on whether they’d like to enter a rent to own agreement or not.

What is the best place to rent to own in Ontario?

If you want to rent to own Toronto and other major cities in Ontario are great places to start your search!

Generally, it’s extremely difficult for young Canadians to enter the real estate market in major cities like Toronto. This is due to a variety of factors, including the increasing amount that buyers need to save for a down payment.

So, if you’re able to enter a rent to own agreement in a major city, you can bypass a hurdle that many young Canadians struggle with — making a down payment.

That being said, you don’t have to enter a rent to own agreement in a major city to get the most bang for your buck. You can rent to own practically any type of property in many locations!

Insurance for rent to own programs Ontario

Your property insurance needs will change depending on what part of the rent to own process you’re currently in.

If you’re in the rental phase, then you can invest in renters insurance (also commonly known as tenant insurance). 

Renters insurance helps financially protect renters from sudden, unexpected events that can damage their (or others) belongings.

Before purchasing the property, you will most likely need to purchase a home insurance policy. Although home insurance isn’t legally required in Ontario, the majority of mortgage lenders require buyers to invest in a policy.

If you’re currently looking for home or renters insurance in Ontario, be sure to team up with a reputable insurance brokerage, like Surex.

Save up to 25% on property insurance with Surex

Finding the right renters or home insurance policy in Ontario can feel like a never-ending task… unless you team up with a Surex insurance advisor!

At Surex, we work with over ten of the top-rated insurance companies in Ontario, allowing us to offer some of the most competitive quotes on high-quality coverages.

Contact your personal Surex insurance advisor today to get started and to learn how you can save as much as 25% when you bundle multiple policies with one of our carriers.