Rent-to-own friendly banks

[MarkTorgerson]

I have several rent-to-own contracts coming to close later in 2013. I am interested in any feedback from investors or mortgage brokers who have been able to close deals. Has anyone found certain lenders that have been easy to work with for funding rent-to-own deals? Any tips or suggestions for getting your deal funded? Is anyone putting the deposit money into a trust account 3 months before the deal closes?



I have found the local Credit Unions easy to deal with but not every tenant/buyer deals with them.



Thanks in advance,

 

[Sherilynn]

It makes a huge difference if you receive monthly option payments or just an initial credit. If there are no monthly payments, then any bank can do the deal if they are willing to look at it as a straightforward purchase (with a really long close). We even closed one with a bank that won't touch regular rent-to-own's.



My mortgage broker did a lender survey about a year ago with the following positive results:

• Bridgewater
• FirstLine
• Merix - case by case basis
• Resmor
  Servus
  TD
  There are several from whom we did not receive a response.
  Some of the "No RTO" banks are: Canadiana, ING, and MCAP.

I have more details on their requirements, but the most important requirements are CMHC's: "Option agreement must include purchase price. Market rent and option payments must be clearly outlined. There must be a refund clause."

 

[MarkTorgerson]

Thanks Sherilynn,



Do you put the tenant/buyer's option money into a trust account 3 months before the contract closes?

I had heard this can help with getting a deal funded

 

[Sherilynn]

I haven't been asked to do that, but one bank asked us to put the option funds in our lawyer's trust account before they would finalize the mortgage application. That makes sense since this is the way it would be with a regular purchase.



The 3 months' proof of down payment is usually satisfied by the tenant-buyer showing bank statements and me producing a report showing the receipt of those funds.

 

[kir]

[quote user=Sherilynn]I have more details on their requirements, but the most important requirements are CMHC's: "Option agreement must include purchase price. Market rent and option payments must be clearly outlined. There must be a refund clause."




When you say there must be a refund clause, is this referring to the refund of the options credits, shall the tenant buyer fails to get a mortgage?



Kir.

 

[Sherilynn]

[quote user=kir]When you say there must be a refund clause, is this referring to the refund of the options credits, shall the tenant buyer fails to get a mortgage?



Yes. However they don't specify what portion must be refundable. We were told it must be "reasonable."



Our option agreement states that 20% of the initial option payment is refundable. However, some banks require that the entire option is refundable, in which case you could write an amendment to the purchase contract stating that the option is refundable.



Banks that require that the option be 100% refundable may be satisfied with an option agreement that states something like: "should the optionee be unable to get suitable financing, 100% of the option monies will be credited back to the optionee as option payments on a renewal of the option agreement."