There are 2 common contracts:
1) Lease option – this is where you have the right to purchase the property. With the lease option, you are not required to pay stamp duty and have a set time frame to refinance
2) Vendor finance – where you pay stamp duty and you have a lot more flexible time frame to refinance.
The Lease option is good if you don’t want to pay stamp duty.
The vendor finance allows you to use the improved value of the property when you refinance. For example, if your improvements add $30,000 to a $100,000 house, they will allow you to borrow more than the initial $100,000.
If you are planning to stay long-term in the house, I would lean towards a vendor-finance or move towards a vendor-finance.
To know which is the best contract for you, speak to a mortgage broker, preferably one that understands rent to own and refinancing. Which one is right for you as a purchasor? Or as the landlord/investor ?
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