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Manoj Atri Sales Representative
RE/MAX Hallmark Realty Ltd., Brokerage Independently owned and operated
685 SHEPPARD AVENUE EAST Unit: 401
Toronto, ON   M2K 1B6

Office: [416] 494-7653Mobile: [416] 275-2089

Are Rent To Own Homes More Expensive?

Rent To Own Homes are more expensive than Buying. Main Reasons are - Rent To Own is generally a Program which is trying to address the worst case scenario i.e. A Buyer Prospect was not able to obtain a mortgage for purchase and was also not able to procure a property for rental. In short Buyer Prospect ran out of options. As Tenant / Buyer they will have to pay more on top of their rental amounts towards additional down payment. Further Buyer Purchaser has to pay property per year appreciation prices etc.

Rent To Own Homes - Is it A Costly Program?

Rent To Own Home - Is it a Costly Program Review with Example:

First Let's Review a Regular Property Purchase:

Freehold Property Purchase Price: $500,000 [A]
Per Month Mortgage Amounts  = $3,000 / Month
i.e. [Mortgage = $2,300 + Utilities = $300 + Property Taxes $300 + Insurance = $100]
Assuming Property Appreicates 5% per year.
Property Vaue After 5 Years = $630,000 [B]
Mortgage Balance After 5 Years = $430,000 [C]

Now Let's Review the above scenario as a Rent To Own Purchase:
Freehold Property Investor Purchase Price: $500,000 
Per Month Mortgage Amounts  = $3,500 / Month
i.e. [Rental = $2,600 + Utilities = $300 + Content Insurance = $100 + $500 Towards Down Payment]
Assuming Property Appreicates 5% per year.
Option Price After 5 Years = $630,000 
Down Payment Adjustment $500 X 60 months = $30,000

Lease Option Buy Back Purchase Price = $600,000 

Let's Now Calculate The Difference In The Above Two Scenarios:
Per Month Difference - $500 X 60 months = $30,000
Option Price Difference - Mortgage Balance After 5 Years
Total Difference > $630,000 [B] - $430,000 [C] = $200,000 [D]
=> Though the Property Appreciated by only > [B] - [A] = $130,000 [E]

Conclusion:
So yes it is a costiler program because you approximately overpaid by $70,000. 
i.e. Total Difference - Property Appreciation > [D] - [E] = $200,000 - $130,000

 

Request More Info: Rent to Own FREE Homes Listings Greater Toronto Area.

Manoj Atri Sales Representative
RE/MAX Hallmark Realty Ltd., Brokerage Independently owned and operated
685 SHEPPARD AVENUE EAST Unit: 401
Toronto, ON   M2K 1B6

Office: [416] 494-7653Mobile: [416] 275-2089

Trademarks owned or controlled by The Canadian Real Estate Association. Used under license.

The information provided herein must only be used by consumers that have a bona fide interest in the purchase, sale or lease of real estate and may not be used for any commercial purpose or any other purpose.

Information is deemed reliable but is not guaranteed accurate by TREB.

Toronto Real Estate Board - IDX Last Updated: 8/23/2019 8:36:26 AM