As home prices continue to rise and Canadians struggle to make dreams of homeownership a reality, Requity Homes is looking to modernize the rent-to-own process. Currently servicing northern Ontario (Sudbury, Thunder Bay, North Bay, Sault Ste. Marie), but with plans to expand in the future, Requity helps Canadians purchase homes that meet their needs and fit into their budgets.
We got to speak with the Requity Homes team to understand the struggles Canadians are facing when it comes to homeownership and how Requity is helping.
What is Requity Homes? And how did you come up with the idea?
Requity Homes is creating an alternative path to homeownership through a modernized rent-to-own program. We help qualified renters purchase the home of their choice upfront so that they can rent the home from us with the option to buy back the home at a guaranteed price down the line.
Homeownership is something that’s close to my heart. I still remember having to move 7 times during my first two years in Canada. That experience just reinforced how important homeownership really is. Owning a home is so much more than just having a roof over your head. It’s a place to call your own, to raise a family, and to build wealth. Yet, too many families find themselves on the outside looking in, feeling stuck renting. Rising home prices, stagnating wages, and tightening mortgage requirements have left many unable to achieve their homeownership dreams. About two years ago I saw the opportunity in Canada to help families who could afford the cost of a mortgage, but for whatever reason found themselves unable to get one. That’s when I decided to quit my corporate job and started Requity Homes.
What is rent-to-own? Is Requity different from a typical rent-to-own program?
Our program is pretty straightforward. We help renters purchase the homes of their choice upfront and rent it to them for the duration of the lease term (typically 2-3 years). Each month, they pay the market rent plus a set monthly premium which goes towards their future down payment. By the end of the program, they’ll have their down payment saved and can buy back the home from us at a pre-determined price.
Compared to other rent-to-own providers, we take a more holistic approach to homeownership that’s focused on helping families get mortgage-ready by the end of the program. We’ve structured our program so that in the event customers want or need to walk away, they can cash out their accumulated monthly savings. Regardless of the outcome, they still come out of the program having saved something.
We also provide a suite of personal finance resources to help our customers make more informed decisions with their money. Likewise, on the credit score side, we provide credit coaching and report rental payments to credit score providers, which helps our clients improve their credit scores over time.
How are you creating an alternative path to homeownership?
I always like to use the analogy of leasing a car. Nowadays you go to any car dealership. There are three ways to access a car – buy it all in cash, finance it through a loan, or lease to own a car. No one questions whether lease to own a car is legitimate. However, when it comes to homeownership, you have two options– buy it in cash or finance it with mortgages. If you think about it, homes cost a lot more money and there should be more financing options available. Homes are an appreciating asset class. There are tangible benefits for the end-users to lock in the future buy-back price. To us, we envision the world where rent-to-own a home is as common and easy as lease-to-own a car. That is how we’re creating a new path to homeownership.
Who is best suited for your rent-to-own program?
Our program is perfect for families who have the income to afford a home but can’t get a mortgage today. For instance, we helped a new business owner who is considered self-employed. Banks require a minimum of two years of operating history before they can even consider their income, so some business owners tend to have some trouble qualifying for a mortgage. Likewise, in the case of newcomers, many simply don’t have a long enough credit history in Canada to get a mortgage, despite working full time and having the salary needed to pay a mortgage. One of the clients we helped out had a credit score of 517. But the only thing he had on his credit report is a credit card with a $500 limit. He has not been in the country long enough and didn’t know that high utilization on his credit card has a negative impact on his credit score. Whether you’ve had previous issues with your credit score or simply lack the savings for a 20% down payment, we see rent-to-own as a great stepping stone to get into homeownership.
When a consumer works with Requity, who chooses the house? Are all houses eligible or are there some general requirements? Is there anything specific about the process that consumers should be aware of?
Our clients pick the home they’d like us to purchase on their behalf. They have the full flexibility to pick the right home that suits their needs. At the end of the day, all we want is to help our clients buy a home they actually want since their hope is they’ll be living there for many years!
We do have general requirements like the homes have to be habitable (for example, no structural or foundation issues, running water, etc.). The homes also have to be freehold, however, we’re currently looking into potentially expanding to include condos and townhouses with monthly maintenance fees.
In terms of the process, we’ve made it as straightforward as possible. All they have to do is visit our website and complete our application and they’ll know whether they’re pre-qualified on the spot. All applications are free and won’t impact their credit score.
How long is the rent-to-own program with Requity?
2-3 years is the most common term for our program
What options do clients have if they don’t want to buy back the homes they are renting from you?
We understand things can change in 2-3 years. Right from the start, we wanted to make sure that clients have the flexibility to make the best choice for their situation. All clients can walk away and cash out their cumulative down payment savings minus a transaction fee at the end of the lease term, so regardless of the outcome they’ll still leave the program with more money than they started.
Credit scores are a pretty big topic right now, consumers are always looking for ways to help improve their credit. Are the payments made to Requity reported to the credit bureaus?
Yes, we report the rent payments to the credit bureaus. Rent payments are often the biggest expenses many people incur on a monthly basis, yet on-time rent payment is usually not reflected in their credit scores. We want to change that and help our clients improve their credit scores by reporting their rent payments to the credit bureaus.
Why do you think homeownership is so hard to attain these days? In your opinion, what kind of barriers do Canadians face when it comes to homeownership?
The run-up in housing prices has made it extremely difficult for families to keep up. Even if you managed to save consistently, because home prices are a moving target, many Canadians find themselves further behind. Combined with stricter mortgage underwriting and a very tight supply in homes, it’s gotten really difficult to manage. That’s why we felt it was important to give people the predictability and price certainty they deserve.
Given the past two years, have you seen an increase in demand for alternative ways to become a homeowner? Do you think the typically, rent an apartment first, save 20%, then buy a house approach is no longer working for Canadians?
Yes, we definitely noticed an uptick and had a steady stream of inquiries coming our way. With work from home and growing needs for more space, I think many families found themselves thinking critically about their housing situations.
People are frustrated with housing and homeownership becoming increasingly inaccessible. We’ve all been told a narrative around homeownership that if you get a decent job and save up a down payment, you’ll be able to own a home eventually. The reality is that “eventually” is starting to look a lot more like “never” for too many Canadians. No one expected COVID to run up home prices by 20-30% and families who were saving for a down payment and were on the cusp of buying now find themselves further than before.
For the families we’ve helped in 2021, many of them likely would have been priced out of the market over the last year. Fortunately for them, they’re all on track to own their homes by 2023/2024.