How Does Rent to Own Work in Ontario?

With housing prices ballooning recently, it’s no wonder Canadians struggle to afford the listing price. To twist the knife in the wound, mortgage lenders have tightened their grip on lending standards, which results in more and more people being unable to get approved. 

Some years ago, the solace from this predicament was renting. But the rising cost of rent has also eliminated hopeful homebuyers from the pool and rendered them unable to save enough for a down payment

Luckily, the emergence of the rent to own property has provided a sliver of hope.

So how does rent to own work in Ontario? Let’s check it out!

How Does Rent to Own Work in Ontario?

If you’ve never heard of rent to own in Canada, it’s most likely because it hasn’t been around for too long. In the past, it was either rent or own, but even nowadays, many people still don’t know there’s a third option.  

Essentially, a rent to own arrangement is an agreement stipulating that you (the tenant) will pay rent every month to the landlord. Sounds just like renting, doesn’t it?

But it isn’t, because a portion of the rent you pay monthly goes towards your down payment (rent credit) for purchasing the home you’re living in down the line. Therefore, you’re renting a home you’d like to live in, while simultaneously growing your down payment to buy it. That way, you’re not stalling your venture into real estate due to unfavourable circumstances.  

Rent to own in Ontario enables hopeful homebuyers to take small steps towards achieving homeownership and slowly eliminate obstacles that have prevented them from qualifying for a mortgage or buying real estate the conventional way. 


Rent to Own Requirements

Generally, the rent to own program in Ontario involves 2 sets of contracts: a rental agreement and a rent to own agreement. 

The rent to own agreement is what differentiates this scheme from renting, as it allows homebuyers an option to purchase the home.

Lease-Option Agreement

The option to purchase or lease-option agreement is a document that enables you to purchase the home you’re renting. 

During or after your lease expires, you can buy the property you’ve been staying in, although you’re not obligated to. Your agreement will most likely range from 1 to 5 years, and if you don’t buy the home during that time, you will lose the rent credit you’ve put down, but won’t incur additional penalties. 

Meanwhile, your landlord can’t sell the home to someone else during your contract, as they’re only allowed to put the property back on the market after your lease has ended and you have decided not to buy.  

Lease-Purchase Agreement

In lease-purchase agreements, you’ve decided you agree to buy the home at the end of your lease. 

Since this is an official agreement that you’ll continue making payments on the home, a failure to do so will most likely result in penalties, including loss of the rent credits you contributed during your stay. 

Therefore, if you’re not entirely certain that you want to own the property after your lease is up, it’s better if you opt for the lease-option agreement, which will grant you the freedom of choice. The purchase price of the home will be included in either contract. 

Is Rent to Own the Right Option For You?

Rent to own homes in Ontario are becoming a more popular and sought-after arrangement due to the flexibility and benefits that come along.

But what are those benefits exactly? 

Pros of Rent to Own in Ontario 

This agreement is famous for being advantageous for both buyers and sellers. 

For buyers, it can help those with a subpar credit score save for a down payment. Since a lower credit score can prevent you from being eligible for a mortgage or getting a loan for a down payment, such lease options can facilitate building strong credit and saving money during the rental period. You’re going to be renting anyway, so why not grow your savings?

Apart from this, rent to own programs provide you with a chance to build up equity in your home, although it’s not like the traditional equity in owning a home. Namely, the portion of your monthly rent that’s put aside for the eventual purchase is a way of investing in your home. 

Additionally, you’ll have the option to move into the home right away without waiting for the closing dates and lock in the price for when you do buy the property. With today’s increasingly volatile markets, it’s beneficial to have a secure price in case averages rise in the area. 

Cons of Rent to Own in Ontario 

But as with everything, rent to own homes in Ontario also have some downsides. Evidently, the lease-purchase contract is restrictive and can cause tenants to lose their money and accrued payments if they decide not to buy the home after the lease. Consequently, the down payment you’ve accumulated will be lost. 

Sadly, when looking for a rent to own property, you can come across the occasional scam in that some landlords or investment companies make the buyer responsible for paying off debt with exorbitantly high rent prices. However, you can minimise or even eliminate this possibility by working with credible real estate agents or attorneys. 

Although locking in a price for your property can be good, especially if the market prices are increasing, you may also be unlucky enough to secure a high price if you sign the agreement when the market is hot. Then, even if the prices in the area decrease, your home will still carry the same price tag. 

Last but not least, keep in mind that if your contract doesn’t include a home inspection, you might not uncover faults until after you’ve signed the agreement to purchase it. By then, it will already be too late to turn back, even if your home has issues. 



As you can see, rent to own in Ontario can be a wonderful opportunity for both tenants and landlords alike. With the myriad of benefits and the dangling possibility that you might buy the home you’re renting in the future with a sizeable down payment, it makes sense why many are opting to go down this route. 

After all, you’ll be renting anyway, so why not save for a purchase with your monthly rent?


What is the downside of rent-to-own?

Rent to own has several disadvantages, including money loss from the contract, a susceptibility to scams, locking in a high purchase price, possibilities of making extra payments to reimburse the landlord if the agreement is nullified, contracts disallowing home inspection until after signing the agreement, monthly payments that can be higher than the average rental payment in the town or area, etc.

Are there rent-to-own homes in Ontario?

Yes, there are rent to own homes in Ontario, but to get the one to benefit your financial situation, you should consult a real estate agent or attorney.

How does rent-to-own program work in Canada?

The rent to own program is an agreement for the rental of an item or a property. Therefore, a tenant is allowed to live in a rent to own property while paying rent for a set amount of time, after which they can buy the home if they like. A portion of the rent goes towards your down payment, so if you decide to buy the home after your lease term, you’ll have enough savings to do so.

How do rent-to-own schemes work?

Rent to own schemes allow the tenant to live in a home while paying rent with the possibility to buy the property down the line. The rent amount is split between the landlord of the home and the tenant’s possible down payment. Therefore, if the tenant decides to buy the property after the lease ends, they’ll already have enough saved.


When Biljana first started off her career, she was focused on economics, which was also her area of professional study. However, in time, she started to familiarize herself with the concept of insurance, which instantly struck a chord, allowing her to constantly upgrade her knowledge and eventually become an insurance aficionado. When she's not writing, she loves to go on hikes and explore various natural surroundings.

Latest from this author

Rental Credit Check in Canada: An All-Around Guide How Does Rent to Own Work in Ontario? How to Find a Mortgage Lender on a Property: A House Hunter’s Guide Motorcycle Insurance in Ontario: All You Need to Know in 2024

Leave a Reply

Your email address will not be published. Required fields are marked *