There is NO guarantee that you will qualify for a mortgage at the end of your term; hence you may lose your deposit!
- You are buying a home based on an estimated future value, so you could be paying an over-inflated price. What happens if your house de-values over the term of your R20 contract?
- There can be (if the mortgage becomes ‘private’) hefty fees involved.
- You DO need an initial deposit (usually 5 -10% of the value of the home)
- Terms are usually 1-3 years, so if you’re credit challenged, you may not qualify for a mortgage at the end of your contract.
- If certain documents are NOT completed upfront (for lender’s future use), you won’t get the mortgage. Certain items such as an appraisal up-front, option purchase agreement, market rent reports and such must be completed and dated in the beginning.
- Only a handful of lenders will mortgage these.
When it comes time to finance your Rent-to-Own, you can waste a lot of time dealing with banks and lenders that don’t deal with Rent-to-Own contracts. Always connect with a mortgage broker who deals mostly with investors who thoroughly understand Rent-town and, most importantly, which lenders will finance Rent-to-Own.
Original article: https://dominionlending.ca/news/