While the rent-2-own strategy is designed primarily to assist renters, especially those getting into the market for the first time, you may be surprised to hear that it can be a life-saver for some homeowners.
Now why would someone who already owns a home be interested in renting-to-own one? You ask.
The program certainly isn’t designed for all homeowners. But it fits perfectly for a small segment of them.
And the current mortgage environment may just be forcing many into that segment.
You see, many who financed a home purchase in the low interest environment of the last few years, and whose mortgages are now up for renewal, are facing payments far beyond what was once manageable, especially if they had variable rates.
Combined with the inflation that’s causing everything else to be so much more expensive than before, some just can’t do it anymore. They’re falling behind. They’re “delinquent.”
When that happens, lenders step in and call their loans. They initiate foreclosure proceedings.
That’s likely a disaster for the homeowner. If they lose their property to the banks, they may lose everything— their home, their equity, often their lifelong savings. By then, they’ve also seen their credit scores tumble. They’ll become renters again.
That’s where we can step in to help. If they are in the stage between when the bank calls the loan and the judge awards the property to the bank, a stage called “Pre-foreclosure,” we may save them.
To clarify: When a lender wants to foreclose on a property, it needs to apply to a court for an order to do so. The court normally grants the owner a grace period, three to six months, in which to make restitution and avoid the foreclosure. If they are unable to come up with the cash (as most are), they may seek to sell the property. But, under the gun, they are in a weak bargaining position, owe the lender a bunch of arrears payments and, in any case, with their loss of credit standing, will be forced to revert to being renters.
Hello! We’re here to help!
It won’t work in every case, but if there is considerable equity in the home—there usually is, because the mortgage has been paid down and the property has appreciated since the start of their mortgage—then we can make it work.
We can buy the home directly from the delinquent homeowner for a price that’s high enough to pay out their mortgage, and possibly other debts they may have, as well as provide enough additional cash to meet the deposit requirements for getting into our rent 2 own program. This price must still be below the market value of the home.
At the same time, we enter a lease-option contract with them for a long enough period of time to rebuild their credit and save up the additional amount (beyond the initial deposit) that they will need when they complete the term, in order to get a new mortgage. It’s a typical rent 2 own.
At the end of the term, credit now rebuilt and savings now sufficient for the down payment, we transfer the title back to them.
They never need to move out of their home, they simply give up ownership for the period of the rent 2 own, and get it back at the end.
They don’t get the permanent blemish of a foreclosure on their credit report. (And, know that a foreclosure on one’s credit report will prevent one from getting another mortgage for at least six years and maybe forever, with some lenders. So not only is the blemish avoided, but the period for requalifying for a mortgage is drastically shortened.)
Additionally, they have the motivation and the full resources of our program to help them get re-qualified for home ownership quickly.
And any equity they lost when we bought the property at under market value they get back when they complete the program, because that price is based on our initial purchase price, not market value!
Do you know anyone facing hardships because of the current inflation and the sharp rise in mortgage rates? Do you know anyone who may be facing foreclosure?
Please don’t let them face that indignity or the economic disaster of a foreclosure! Please refer them to Fraser Valley Rent 2 Own.
And let us know, because if we are aware that we have received a referral from you and they join our program, we pay you a cash stipend in appreciation for helping us all out. Spend the cash however you want.
It’s a win-win-win: for the distressed homeowner, for us, and for you!
At least, that’s how I see it . . .