Rent-to-Own Agreement

Understand how rent-to-own agreements work in Canada, their benefits and risks, and how they help renters transition into homeownership.

Rent-to-Own Agreement

May 22, 2025


What is a Rent-to-Own Agreement?

A Rent-to-Own Agreement is a contract that allows a tenant to rent a property with the option—or obligation—to purchase it after a set period.

Why Do Rent-to-Own Agreements Matter in Real Estate

In Canadian real estate, rent-to-own agreements are often used by buyers who may not currently qualify for a mortgage but plan to do so in the future. These agreements typically include:


A lease term (usually 1–3 years)
  • A portion of monthly rent set aside as a future down payment
  • A locked-in purchase price or formula for future value
  • An option or requirement to purchase at the end of the lease

Benefits for buyers include:
  • Time to improve credit or save for a down payment
  • Price certainty in a rising market

Risks and considerations include:
  • Loss of credits if the purchase doesn’t proceed
  • Responsibility for maintenance and insurance
  • Higher monthly payments compared to standard rentals


Rent-to-own agreements must be carefully reviewed by legal and financial professionals to ensure fairness and clarity for both parties.

Example of a Rent-to-Own Agreement in Action

A family enters a rent-to-own agreement for a $600,000 home, paying $2,500 monthly, with $500 credited each month toward a future down payment.

Key Takeaways

  • Combines renting with future buying option.
  • Monthly rent may include credit toward purchase.
  • Purchase terms are agreed upfront.
  • Suitable for buyers building credit.
  • Requires legal review to avoid pitfalls.

Related Terms

Additional Terms

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Mortgagee in Possession

A mortgagee in possession is a lender who takes control of a property after borrower default, but before foreclosure or power of sale. The lender. more

Lease Surrender Agreement

A lease surrender agreement is a negotiated contract between a landlord and tenant that ends a lease before its scheduled expiration. Terms may. more

Green Infrastructure

Green infrastructure refers to natural or engineered systems that manage stormwater, reduce heat, and improve sustainability in developments.. more

Escrow Holdback

An escrow holdback is a portion of funds withheld at closing and held in escrow until specific conditions are met, such as completion of repairs,. more

Underused Housing Tax

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