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CaptainCrunch
11-08-2010, 03:06 PM
I have a buddy that doesn't have the down payment money for a condo, he's been hearing about Rent to Own options as an alternative.

Good idea? Bad Idea? any insight

Are these condo's listed somewhere?

Bill Bumface
11-08-2010, 03:19 PM
No useful advice, but when I see "Rent to Own" or "Payday Loans" my brain changes it to "Taking Advantage of Poor People"

Travis Munroe
11-08-2010, 04:08 PM
Rent to Own can be good or bad.
In my opinion way to little of each months rent ie:10% will go towards your down payment to purchase the property. Say you live at the given property for a year at $1,000 per month then you have put away (the landlord has) $1200 of your down payment.
Now say your decide to walk away, you walk away with nothing.
The average person should be able to save $1200 a year no problem if your budget allows for $1000 rent.
Then we have assumable mortgages which are a great thing for people who are self employed. You could make $100k per year but write off a huge portion of it. Now you dont have enough money on paper to get the wanted mortgage. An assumable basically has you take over someone mortgage for an extended period of time. Now that you have proved yourself for lets say 18 months you just take over the mortgage without having all the hoops to jump through of a low income on paper.

Im super busy right now and the grammar in this post was horrible, I was rushing through it but pm me if you have further questions.

moncton golden flames
11-25-2010, 01:27 PM
isn't a mortgage essentially a 'rent to own' scenario? you don't own the house until it's paid for, the bank does, right?

onetwo_threefour
11-25-2010, 02:42 PM
isn't a mortgage essentially a 'rent to own' scenario? you don't own the house until it's paid for, the bank does, right?

Yes and no. In Alberta the answer is no and has been for quite some time. Historically and in some jurisdictions you could certainly draw some pretty close comparisons.

In deed title systems, the bank would often 'hold the deed' meaning they literally had physical possession and control of the piece of paper that denotes ownership of the land. In contrast, in Alberta and other land registry jurisdictions you own the land, the government holds all the deeds and the bank has a 'secured interest' in your property that is not ownership, and which they cannot convert into an ownership interest without some legal process such as a foreclosure or quit claim. This is in contrast to the deed system where the bank has de facto ownership by virtue of having possession of the deed.

With respect to the previous statements about assumptions and rent-to-own arrangements. For a buyer they can be great, for a seller they can be risky. Assumptions have more or less disappeared in my experience and I don't think I'd hold my breath looking for a house with an assumable mortgage. Rent-to-own's are tricky and a Seller really needs to have a good contract in place.

Mike Oxlong
11-25-2010, 09:36 PM
I have a buddy that doesn't have the down payment money for a condo, he's been hearing about Rent to Own options as an alternative.

Good idea? Bad Idea? any insight

Are these condo's listed somewhere?

There are lenders out there that have "cash back" mortgages where they essentially pay the 5% down payment for you. You do pay a premium with the rate but it is a way to get in the market with no money down.

bizaro86
11-26-2010, 08:11 AM
There are lenders out there that have "cash back" mortgages where they essentially pay the 5% down payment for you. You do pay a premium with the rate but it is a way to get in the market with no money down.

Don't you have to have pretty good credit to get those? My general impression is that the credit bar is higher than the average credit score of people with no savings.

Mike Oxlong
11-26-2010, 11:36 AM
Don't you have to have pretty good credit to get those? My general impression is that the credit bar is higher than the average credit score of people with no savings.

Yes the qualification for those mortgages are tougher than your typical mortgage.

Everyone's situation is unique, some people have great credit but simply don't have the money saved yet. Other people don't have money saved yet and happen to have bad credit as well, which leaves them SOL.

They aren't a hugely popular product as most people manage to scrape together at least 5%. Often times I see a lot of young buyers getting the down payment or at least part of it gifted to them from their parents.

onetwo_threefour
11-27-2010, 12:23 AM
What is with those lawn signs where it says "For Lease"?

Probably just rental properties, but it could be people who have bought something else that they were forced to close on but couldn't sell their own home and need renters to help pay the mortgage until the market improves and they can sell. Just speculating there though.

bizaro86
11-29-2010, 08:42 AM
What is with those lawn signs where it says "For Lease"?

Probably the dollar store where they got the sign from only had "For Lease" and not "For Rent." It's pretty much the same thing. In the UK all the signs say "To Let."

Titan
11-29-2010, 12:40 PM
Yes and no. In Alberta the answer is no and has been for quite some time. Historically and in some jurisdictions you could certainly draw some pretty close comparisons.

In deed title systems, the bank would often 'hold the deed' meaning they literally had physical possession and control of the piece of paper that denotes ownership of the land. In contrast, in Alberta and other land registry jurisdictions you own the land, the government holds all the deeds and the bank has a 'secured interest' in your property that is not ownership, and which they cannot convert into an ownership interest without some legal process such as a foreclosure or quit claim. This is in contrast to the deed system where the bank has de facto ownership by virtue of having possession of the deed.

With respect to the previous statements about assumptions and rent-to-own arrangements. For a buyer they can be great, for a seller they can be risky. Assumptions have more or less disappeared in my experience and I don't think I'd hold my breath looking for a house with an assumable mortgage. Rent-to-own's are tricky and a Seller really needs to have a good contract in place.


Well written answer. Cudos.