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Written By
Steve Tustin
Apr 9, 2025
•Housing
Many newcomers to Canada arrive with the goal of home ownership, and many buy a home within a few years. However, coming up with a sizeable down payment and building a Canadian credit history can be a challenge for newcomers. That’s why a rent-to-own program and contract can be a strategic path for newcomers looking to buy a home. Discover how rent-to-own works to decide if this is an option for you!
Home prices in Canada remain high and may seem unaffordable for many newcomer renters. As a result, rent-to-own programs are becoming more popular as an affordable way to buy a home in Canada. With growing popularity, more real estate companies and landlords offer newcomers rent-to-own programs to help them become homeowners.
This creative path to home ownership works by reducing the large down payments typically needed in today’s housing market. This makes the goal of owning a home in Canada easier for newcomers to achieve.
This is why rent-to-own programs, often called rent-to-buy, are attractive to newcomer first-time homebuyers.
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REGISTER FOR THE WEBINARIn Canada, a rent-to-own agreement is a contract between the renter and the property owner. Like a standard rental agreement, the renter makes monthly payments to the property owner at a set price.
A rent-to-own contract is different from a typical rental contract. With rent-to-own, some of the monthly payment goes toward a down payment on the rental property. These are called rent credits and allow the renter to buy the home at an agreed-upon date.
This program can be ideal for newcomers who may face challenges buying a home through the traditional financing route from a bank. It also helps newcomers:
A rent-to-own agreement gives renters time to save for a down payment through the rent credits that apply to the home purchase when the deal expires.
A rent-to-own agreement allows newcomer homeowners to sort out financial issues and save money to buy a home in Canada at a locked-in price. The duration of the agreement also allows newcomers to build their credit history and score. Making on-time rent payments is vital to boosting your credit history.
A rent-to-own agreement allows you to live in a house you’ve picked out before buying it.
If the value of the property increases during the rental period of the agreement, the renter still buys the property at the agreed-upon lower rate. This allows the new homeowner to keep the higher value of the home.
The renter is responsible for buying the home at the agreed-upon price, even if the property’s value decreases during the agreement term.
If the renter cannot buy the home at the end of the agreement, they may have to leave the property and lose the down payment credits that were part of the program. Newcomers need to fully understand the agreement before signing.
Newcomers do not need a large down payment to get a rent-to-own home. However, they still have to pay some money up front. This fee or option deposit must be paid on your move-in date. The deposit is deducted from the set purchase price.
A rent-to-own program agreement usually runs from one to 5 years. The landlord cannot sell the home to anyone else during the contract’s term. When you buy the house at the end of the lease term, you must pay the remainder of the down payment.
Here’s what it would cost to enter a rent-to-own agreement to buy a home in Canada for $495,000:
With this agreement, a tenant would save $26,640 for the down payment over the three years they’re renting the property. After putting 5% down, the remaining $2,509 could be used toward closing costs.
In Canada, 5% is the minimum amount you need for a down payment. In this case, the owner must also purchase mortgage loan insurance.
Most Canadian landlords require proof of valid tenant insurance. Tenant insurance protects your possessions and valuables (inside and outside your home). Tenant insurance can also provide other types of coverage, such as personal liability for accidents and damages and living expenses if you’re forced to move out due to flooding, fire, etc.
When you become the property owner, you must have home insurance to protect your belongings, the house, and the property. You must also provide liability protection.
Research home insurance quotes to get the right coverage for your needs.
1. Currently, there are no government rent-to-own programs in Canada. Newcomers interested in these programs must deal with private companies.
2. Rent-to-own programs vary, so research and seek advice. Experts recommend that newcomers work with professional companies affiliated with the Canadian Association of Rent to Own Professionals (CAROP).
3. Newcomers buying through a rent-to-own program must have tenant insurance.
4. The demand for rent-to-own programs is growing in provinces like Ontario, Alberta, and BC, where housing costs are high. Here is a list of CAROP members.
WRITTEN BY
Steve Tustin
Senior Editor, Prepare for Canada
Steve Tustin is the Editor for Rentals for Newcomers and a contributing editor for Prepare for Canada. He is also the former managing editor of Storeys.com and a former senior editor at the Globe and Mail and the Toronto Star.
© Prepare for Canada 2025
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