Question:

Hi John How does rent to own work? A close friend is in a situation where the prospective buyer does not have even 10% down payment for what is currently a rental property (not her main residence. She wants to sell, but we do not have any infor on rent to own scenarios. Any infor would help. Thanks, Pete ...

Answer:

Hi Pete, In a true rent to own scenario, the rental value of the property should first be established by way of a written estimate from an independent market professional, either an appraiser or realtor. Once that has been established, any `extra' rent can go toward the dowm payment required for the purchase. In other words, the market professional establishes the rent at $1,000 per month, you pay as an example, $1,250 per month and each month. Should you choose not to purchase the property, you would normally forfeit your extra rent and if you do, the additional $250.00 is allocated to your down payment. If you choose to go this route, it is imperitive to carefully document everything from the outset, otherwise CMHC or Genworth, the high ratio mortgage insurers, may disallow your claim that you paid extra rent. John Lozinski, 613-721-0010

Answered By: John Lozinski

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