For many people, owning a home is a lifelong dream. However, for some, the road to homeownership can be difficult due to financial constraints, credit issues, or other factors. That’s where Rent to Own comes in. Rent to Own in Alberta is a popular option for those who want to own a home but are struggling to qualify for a mortgage or come up with a down payment. In this blog, we’ll discuss how Rent to Own works in Alberta and whether it’s the right option for you.

What is Rent to Own?

Rent to Own is an agreement between a landlord and tenant that allows the tenant to rent the property with the option to buy it later. The tenant pays an upfront fee, known as the option fee, which gives them the right to purchase the property at a set price within a specific timeframe, typically one to three years.

How Does Rent to Own Work in Alberta?

Rent to Own in Alberta agreements are legal and enforceable, but they must comply with the Residential Tenancies Act (RTA). The RTA sets out specific requirements for Rent Own agreements, such as the option fee cannot exceed 4.9% of the property’s value, and the landlord must provide written notice of the tenant’s rights and obligations under the agreement.

The Rent to Own process typically involves four steps:

How does Rent to Own Work in Alberta
How does Rent to Own Work in Alberta
  1. Agreement: The tenant and landlord agree on the terms of the Rent to Own agreement, including the purchase price, option fee, and length of the option period.
  2. Option Period: The tenant rents the property for a set period, typically one to three years, during which time they can exercise their option to purchase the property.
  3. Purchase: If the tenant decides to exercise their option to purchase, they pay the agreed-upon purchase price minus the option fee, which is typically applied towards the down payment.
  4. Closing: The property is transferred to the tenant, and they become the new owner.

Is Rent to Own Right for You?

Rent to Own in Alberta can be a great option for those who want to own a home but are struggling to qualify for a mortgage or come up with a down payment. It allows you to lock in a purchase price and build equity while you rent, giving you time to improve your credit or save for a down payment. However, Rent to Own agreements can be complex, and it’s essential to work with a reputable landlord and a lawyer who is knowledgeable about Rent to Own agreements.

When considering Rent to Own, it’s essential to factor in the options fee and the purchase price, as well as any rent premiums, which are additional payments made on top of the rent and can be applied towards the down payment. It’s also important to have a plan in place for financing the purchase when the option period ends.

Conclusion:

Rent to Own in Alberta can be a viable option for those who want to own a home but are struggling to qualify for a mortgage or come up with a down payment. It’s important to understand the legal requirements and work with a reputable landlord and a lawyer who is knowledgeable about Rent to Own agreements. By doing so, you can make an informed decision that sets you on the path to homeownership.