The resale market seems to be picking up. It would pick up a lot more if Vendors were to realize the importance of helping the potential purchaser find his/her downpayment. To an awful lot of first time buyers, the mandatory 5% downpayment on a unit of $100,000 is still $5,000. On top of that you must have cash for closing costs (roughly 3% of the purchase price). If the normal renter had that amount of money, it would become easy to sell them on home ownership, because the amount they are presently throwing away in rent, in most cases can pay for an owned unit.

The Rent-To-Own (RTO) plan is an example of helping the purchaser buy a unit even if the downpayment is missing.

The basic idea of the RTO is to establish the purchase price of the unit now, take possession in 30-60 days, but not actually take ownership until you have accumulated your downpayment. You will be paying market rent to the Vendor (landlord) every month, and over and above that amount, you will also be giving your Vendor an amount to be accumulated by him/her "in trust" towards the minimum 5% down payment. Once you have accumulated enough money in the "trust account", you can now buy the unit.

Some of the inherent problems with the plan are as follows:

a) it may be two years before you actually own the unit...can your Vendor wait that long to sell?

b) Most mortgage lenders can hold their interest rates for only 90 days, what will the rate be when you have accumulated your downpayment?

c) Since you only have 5% down, Canada Mortgage & Housing Corporation (CMHC) or General Electric Capital (GE Capital) must be

involved in the transaction. Your mortgage lender cannot apply to them for permission to lend you the money until 6 months from the closing date. That could be 18 months down the road, will you still qualify then?

d) What will the value of the unit be when you have accumulated the downpayment. If it's worth more than when you made your offer, that's great. If it's worth less, you must make up the difference by adding to your downpayment, or getting the Vendor to reduce the price...which is not likely.

Under the RTO plan, the Vendor must not be contributing to your downpayment. If CMHC or GE Capital feel that the rent charged by your Vendor was below market value, that could kill the deal. If your Vendor says that in 6 months he/she will rebate the rental to accent the downpayment, that is not allowed.

The system seems to be unduly worried about you and your lack of downpayment under the RTO plan. No matter the shortcomings, home ownership is worth the hassle. All of the concerns above can be addressed and successfully overcome. It would be much better to have the downpayment, but even without, now is the time to go shopping. There are just too many pluses in home ownership to go on renting.

You must be made aware though that in your quest to own, lack of downpayment can make you vulnerable to scam artists who pray on the fact that you don't know the rules. Please feel free to address any concerns to this writer, c/o the Ottawa Sun.