KAT16

Wonder if anyone can help.

We will be moving to Calgary in August and have been looking at renting a house! On one of the sites I have looked at they are offering Rent to Own on some properties.

I understand that your monthly rent is higher but that part of it goes towards the down payment on the house at the end of a specified time. What I don't know is what happens if, although you can afford the down payment, you don't earn enough to get a mortgage on the price of the property? Can anyone help?

thanks

Karen

Purley

I don't know how it works in Alberta, but in Saskatchewan, the only rent to own deals I have heard of working in a solicitor's office is called Agreement for Sale. This is usually done where the people cannot afford the down payment or perhaps cannot qualify for a mortgage. Essentially what happens is the Vendor carries the price of the house until the Purchaser has finished paying for it. Once the house is paid for then title is transferred into the name of the Purchaser. While the house is still being paid for the title is in the name of the Vendor and the Purchaser registers a Caveat against the title to prevent the Vendor from selling the house.

I am assuming the deal you mention is similar but perhaps title is transferred before the total price is paid - maybe at some time when the Purchaser can qualify for a mortgage. Otherwise I would think it would work the same. I wouldn't be going into any deal like this without a solicitor's advice and some kind of printed amortization payment to show precisely how much you are paying and the interest etc. etc.

If you do that it should be a good deal - a good way of buying a house if you can't get a mortgage at the time.

Helen Parnell

I looked into this for a client and sought advice from a local reliable lawyer. Her advice is stay away from it. Basically you draw up an agreement to buy the property at a certain time, having paid additional rent to make up a deposit. The idea is that the price is set now July 08. You agree it and then sign a contract to say you will buy it may be next July 09.

The problem arises when if the house goes down in value you as a renter are contracted to buy at a higher price The seller has the advantage, Lets say in a year you still can not get a mortgage then does the owner still keep all your deposit or does he return it with interest

Two years ago sellers were not offering rent to own as the price may have gone up and they were not going to give the buyers that advantage. Now when it could go down they are offering it with the hope that someone agrees and not fully understand it.

This is the correct rent to own in Alberta.

Now I did speak to someone last month about rent to own who totally understood it a completely different way. He stated (and he was wrong) that you rent the property and if the seller wants to sell it, then he gives you first refusal, thus saving the seller the hassle of finding another buyer. This is actually called 'option to buy'. You then offer the seller the market value.

Hope this helps.

KAT16

Thank you both for your replies.

I have seen quite a few agents offering this and just wondered how it all works.

Guess we will stick to renting until we can find something that we want to buy.

Helen, we are looking to live in Airdrie and wondered if you dealt with that area or could perhaps recommend an agent to use in that area?

Thanks again, you've both been very helpful.

Karen

Helen Parnell

I am told there is no property Management company working from Airdrie. So of course I often go over there and have a few rentals there. I will pm you.