Rent-to-Own: The Good, The Bad, and The Ugly
Rent-to-own homes in Canada are marketed as a fast track to homeownership - but if you don’t know how these agreements work, you could lose tens of thousands of dollars.
Here’s a real story that will make you think twice before signing.
The Real-Life Rent-to-Own Horror Story
Clients Jan and Chris (not their real names) thought they were on the path to owning their home.
For years, they paid rent on time. 3 years, in fact. They paid the regular rent amount for their unit, and also paid extra each month the “to own” component of a rent-to-own agreement, where tenants pay extra money promised toward their down payment. They followed every condition in the rent-to-own agreement. Think - rent of $1800, with an extra $700 a month toward savings for their down payment.
What they didn’t know, or neglected to know was an issue:
The rent-to-own contract was arranged by a realtor whose friend owned the property.
Another mortgage broker was supposed to prepare them for financing, and failed.
By the end of the term, the property’s value had skyrocketed. My clients needed just a little more time to finalize their mortgage due to last-minute hiccups.
But the day the contract matured, the seller declared it “null and void” because conditions weren’t met. My clients lost every single dollar they’d put toward surplus rent and down payment credits - tens of thousands gone. The seller relisted the home at full market value and pocketed the gain.
That’s the harsh truth: with rent-to-own, you’re at the mercy of the owner. One missed deadline and the entire deal can collapse.
How Rent-to-Own Works in Canada
A rent-to-own home lets you:
Rent a property now, with the option to buy it later.
Lock in the purchase price at the start of the term.
Have part of your rent go toward your future down payment.
It’s often used by:
People with steady income but bad or no credit.
Self-employed buyers who need time to show consistent income.
Newcomers to Canada who are building credit history.
People who have a hard time saving on their own - this structured setup helps
When done right (with a solid contract and realistic mortgage plan) rent-to-own can be a stepping stone to ownership.
The Risks of Rent-to-Own Agreements
Before you sign, be aware of:
Above-market rent that can make saving harder.
Non-refundable down payment credits if you walk away.
Locked-in prices that can hurt if the market drops.
Seller-friendly clauses that let them cancel the deal.
How to Protect Yourself in a Rent-to-Own
Work with a reputable third-party company or lawyer, not just a friend-of-a-friend arrangement.
Get your mortgage plan in place before you sign - you should have a clear strategy with a mortgage professional, not a “we’ll figure it out a month out”.
Have a mortgage broker and lawyer review the rent-to-own agreement in detail.
Bottom Line
Rent-to-own can be a stepping stone… or a landmine. The difference comes down to how it’s structured and whether you have someone in your corner who knows exactly where the traps are hidden.
If you’re even thinking about rent-to-own, get the agreement reviewed before you sign a single page. It could be the difference between building equity… and losing everything.
If you have cold feet on rent-to-own, there’s plenty of other options out there for you. Let’s chat about what we can make happen for you.
📩 Book a free consult now — I’ll tell you in 15 minutes whether the deal in front of you is a stepping stone or a setup.
Jeff Dinsmore
Mortgage Broker
FSRA # 10315
velomortgage.ca
TMG - THE MORTGAGE GROUP