With housing prices that are continuing to outpace wages, more and more Canadians are getting stuck on the rental treadmill, falling further and further away from the dream of owning a home, with many giving up on the idea completely. 

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If you’re a baby boomer, you might remember a time when it was possible to save up for a mere five years before purchasing your first home. Unfortunately for millennials and young Canadians, the reality of the housing market today looks much different. In fact, in large cities like Toronto and Vancouver it can take up to 36 years to save enough for the recommended 20% down payment.

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Over the past few years we’ve seen new models pop up to try and increase the accessibility of homeownership. One of the more popular models that has emerged is rent-to-own.

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As a new alternative model for real estate, we often get asked if we’re a rent-to-own solution, we’re not! You can think of us as rent-and-own, and here’s why.

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Rent-to-own

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First, it’s important to understand what rent-to-own is. With rent-to-own agreements you sign on to rent a property for a certain period of time with the intention to buy it before the end of your lease. Your monthly rental payments help you save up for a down payment. 

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With rent-to-own because there is a set timeline for purchasing the home, there are extra upfront fees which range from 1-5% of the purchase price. Additionally, at the end of your lease you are required to qualify for a mortgage and put down 5-20%. Should you decide to not take on the mortgage and purchase the home, you risk losing all of the equity you’ve been saving up and your initial deposit. You can learn more about how rent-to-own models compare to Key's co-ownership model here.

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One of the major downfalls of rent-to-own solutions is that you’re not building equity right away. Like the name says, you’re renting to then own. But what if there was a way to own from day one? Enter co-ownership. 

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Co-ownership

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Key’s co-ownership model is a new model for homeownership that allows aspiring owners to start owning for just 2.5% of the value of their home (around 15k for many!) and no mortgage. By removing the two largest barriers to homeownership; a large down payment and the need to qualify for a mortgage, co-ownership allows aspiring owners to get on the property ladder many years sooner. 

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One of the most important differences that separates co-ownership from Rent-to-own is that with co-ownership you start building home equity from day one. 

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You have a monthly payment that covers the portion of the suite that you don’t yet own plus things like property taxes and maintenance fees. Each month a portion of your monthly payment automatically goes towards building your equity, this starts at $50 and is dependent on the home you’re in, but you can invest more as well. The more of your suite you own, the less your monthly payment will be. 

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By enabling the benefits of owning, such as building home equity, with the freedoms of renting from not being locked into a mortgage, co-ownership truly is a hybrid model between renting and owning.

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While Key’s model is new, the positive sentiment is growing. In fact in a recent survey of 2,000 Canadians, when put up against the rent-to-own program, 70% of respondents chose co-ownership compared with 30% who chose rent-to-own. Co-ownership is the clear favourite, especially among renters, where over 90% indicated they found co-ownership compelling.

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If you’re a renter who’s struggling to get into the housing market, learn more about alternative homeownership models worth considering and what it means to co-own your home. 

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