Rent-to-Own Explained
How Lease-Option home purchases work in Fredericton, NB — the money flow, the timeline, and what happens if the deal passes or breaks. Run your own numbers below.
What is a Rent-to-Own (Lease-Option)?
A Rent-to-Own — technically a Lease-Option — lets a buyer move into a home today as a tenant while locking in the right to purchase it later at an agreed price. Part of the monthly rent, plus an upfront Option Deposit, builds toward the buyer's future down payment. It's a bridge for buyers who need time to qualify for a mortgage, save a larger down payment, or build credit — while sellers get a committed occupant and guaranteed upfront cash.
On signing, the buyer pays a Non-Refundable Option Deposit — typically 3–5% of the purchase price — directly into escrow or trust. The agency's commission is collected from that deposit immediately, with the remainder credited to the seller. Each month after that, a portion of rent is banked as a credit toward the eventual purchase.
How the Money Flows
1. Option Deposit
Buyer pays a non-refundable deposit (3–5% of price) into escrow at signing.
2. Commission & Seller Net
Agency commission is paid immediately from the deposit; the rest is credited to the seller.
3. Rent Credits Build Up
A portion of monthly rent is saved as equity credit toward the purchase price.
Rent-to-Own Calculator
Drag the sliders to change the assumptions, then press Re-calculate to update the numbers and graph below.
Deal Assumptions
Estimates only — assumes a 30-year amortization on the remaining balance. Not financial or legal advice.
Upfront Summary
- Option Deposit Total
- $37,500
- Agency Commission (Immediate)
- $18,750
- Seller Net Upfront
- $18,750
Monthly Breakdown
- Base Rent
- $3,500
- + Rent Credit
- $500
- − Sublease Offset
- -$1,400
- Net Out-of-Pocket Rent
- $2,600
End of Term (36 Months)
- Total Rent Credits Accumulated
- $18,000
- Total Down Payment Credit (7.4%)
- $55,500
- Remaining Balance to Finance
- $694,500
- Est. Future Monthly Mortgage
- $4,390
Equity Built vs. Remaining Balance
Deal Outcomes: Pass vs. Break
What happens to each party depending on whether the buyer exercises the option.
| Party | Deal Passes | Deal Breaks |
|---|---|---|
| Seller | Receives the remaining balance via the buyer's mortgage. Property is sold. | Keeps the Option Deposit and all rent/credits paid. Retains 100% ownership and can relist or re-rent. |
| Buyer | Uses accumulated deposit + credits as a down payment and secures a mortgage on the home. | Forfeits the Option Deposit and all rent credits. Must vacate at lease end with no equity. |
| Agent / Agency | Commission was already collected at signing — no further action needed. | Commission remains fully earned and non-refundable, already collected upfront. |
Is Rent-to-Own right for you?
Every Lease-Option deal is different. Talk to Abhi Menon about whether a Rent-to-Own structure fits your Fredericton buying or selling goals.
Talk to Abhi