7 Critical CMHC Elements for Rent To Own

REINteam

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#1
Here is Dan Heon's document containing his 7 critical elements that the CMHC NEEDS to see in all Rent to Own contracts before they will approve the final mortgage for your tenants. Feel free to download and pass on, enjoy!



Dan Heon - RTO July.pdf
 

johnkord

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May 6, 2008
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#2
Thanks to both Madison and Dan Heon for this valuable information. Although, I wonder if I can get a bit more clarification:

1. I assume that these rules apply only to mortgages that must be insured by CMHC, i.e. those where the down payment is less than 20% on the rental property, and I pay for the CMHC insurance, or where the mortgage is arranged through a trust company (rather than a major bank) in which case the trust company pays for the CMHC insurance. Would I be correct ?
2. Item # 4 : Why must a portion of the funds (20% - 25%) be refundable if deal does not proceed ? - not that I wouldn`t refund some portion ... I`m just asking.
3. Item # 5 : Which "additional lump sum payments " are meant ?
4. Last paragraph : Why do lenders need to know that the rental property is a "Rent-To-Own". What difference is that to them from a normal rental ? Seems to me that from a lender`s point of view the Rent-To-Own has less financial risk than a typical rental. The monthly payments are higher (even though the option portion of the rent will eventually be given back to the tenant if and when they close on the preperty) thus providing a higher (albeit temporary ) net cash flow for the duration of the lease agreement. This leads me to the next question: Which rental amount should be reported to the lender ? Just the base amount, or the base + the option amount ?

Thanks in advance to anyone who can shed a bit more light on the above.
 

markl

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#3
Hi John,

Dan is referring to when the tenant is purchasing the property at the end of the term.

Not when you are purchasing the property.

Knock on wood we have not had issues qualifying tenants at the end of the term with CMHC as of yet. They just want to see the proper documentation.

Regards,
 

johnkord

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#4
Thanks Mark. I was not sure whether the intial closing by the investor or final (down-the-road) closing by the new owner was meant. Just got a bit confused. Thanks for clarifying THAT part.

Now I`m not clear on some other points being made: Why must contract "be dated from original onset of the deal" ? Isn`t the tenant buying the property same as anyone else ? ... the inital contract is an "option to buy contract". The contract to actually buy the property is a new purchase and sale contract, is it not ? - in accordance with the option they now will exercise per the "old" contract. I must be mis-understanding something ... oh well, just beginner`s ignorance. Thanks for the input. John
 

Kim780

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Oct 18, 2010
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#5
QUOTE (MadisonNorton @ Jul 30 2010, 03:59 PM) Here is Dan Heon`s document containing his 7 critical elements that the CMHC NEEDS to see in all Rent to Own contracts before they will approve the final mortgage for your tenants. Feel free to download and pass on, enjoy!


Hi. Can you tell me why a portion of the original deposit (#4) must be refundable? Thanks.

Kim
 

Blossom9958

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Oct 11, 2016
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#6
Here is Dan Heon's document containing his 7 critical elements that the CMHC NEEDS to see in all Rent to Own contracts before they will approve the final mortgage for your tenants. Feel free to download and pass on, enjoy!



Dan Heon - RTO July.pdf
Hello,

Is it possible to obtain/ emailed Dan Heon's 7 critical elements RTO PDF ? I wasn't able to access it. Thanks!