Rent-to-Own Pilot Program

The Rent-to-Own Pilot Program gives Island residents with modest incomes who do not currently own a home the opportunity to “rent to own” an eligible home, up to a maximum value of $350,000 (including HST, if any).

Eligible Islanders can submit applications to Finance PEI for the opportunity to take part in the Rent-to-Own Pilot Program.

Eligibility

For an applicant to be eligible for assistance, the following criteria must be met:

• Applicant does not currently own a home;
• Applicant will provide a formal written letter confirming that they have been declined by a recognized financial institution for mortgage financing in the six months prior to making application to the program. The letter will clearly state the amount of mortgage financing that the applicant has been declined for, and the reason(s) for the decline;
• Applicant must reside in Prince Edward Island at the time of applying for the pilot program;
• Applicant has a satisfactory credit rating and must not have outstanding debt obligations on file in the Province’s Central Default Registry;
• Applicant’s total annual household income will be $100,000 or less per annum (family); or $65,000 or less per annum for an individual applicant;
• Applicant will be a Citizen or Permanent Resident of Canada.

An eligible property is described as:

• Will be occupied by the successful program participant as a single-family dwelling, and be their principal residence; rental, seasonal and recreational properties are not eligible;
• Property must be located in Prince Edward Island;
• Property must be pre-existing. New construction financing is not eligible under this program;
• Purchase price will not exceed program maximum of $350,000 (including HST, if any). Initial real property transfer taxes, closing and legal costs incurred by Finance PEI will be recovered from the Participant when they exercise their Purchase Option.

Program

• Finance PEI will purchase a home on behalf of an approved program Participant, who will in turn enter a 5-year Rent-to-Own Agreement with Finance PEI on the same day the home is purchased;
• Provided that the terms of the Rent-to-Own Agreement are maintained in good standing, the Participant may exercise their Purchase Option at any time during the 5-year term of the Rent-to-Own Agreement.
• From the payment of rents to Finance PEI by the Participant, a portion of the payments shall accrue in favour of the Participant, for their use only when exercising their Purchase Option to:
  • Reduce the Purchase Price payable to Finance PEI (“Purchase Price Credit”);
  • Be used towards the cash down payment required to obtain the mortgage financing required to complete the purchase from Finance PEI (“Downpayment Credit”).

Application Process

Eligible applicants start the process by applying to Finance PEI.

Applicants will submit the following in support of their application:

• A copy of their 2022 Notice of Assessment;
• A written employment verification letter from their employer(s) confirming their date of hire, position, annual income and employment status (Full Time, Part Time, Casual, Seasonal, Term);
• A copy of two pieces of government issued identification, one of which will bear the applicant’s photograph and signature, which may include:
  • If a Canadian Citizen:
    • Provincially issued driver’s license or ID Card with photo;
    • Birth Certificate;
    • Passport;
    • Citizenship Certificate.
  • If a Permanent Resident of Canada, your Permanent Resident Card and any one of the following:
    • Provincially issued driver’s license or ID Card with photo;
    • Birth Certificate;
    • Foreign Passport.
• Signed program application;

Applicants are evaluated based on their credit worthiness, income, and total debt service capacity, which will determine the maximum purchase price of the program eligible home that the applicant may purchase with the assistance of the Rent-to-Own program.

Successful applicants will be informed of the maximum purchase price of the program eligible home that they have been pre-qualified for.

Property Identification Process

• The applicant must choose a home that meets program criteria. It is recommended that the applicant engage the services of a licensed realtor to assist in identifying a program eligible home and facilitate the negotiation of a purchase and sales agreement between the successful applicant and the seller.
• Once a program eligible home has been negotiated and is acceptable to all parties;
  • Successful applicant provides Finance PEI with a copy of the agreement of purchase and sales;
  • Finance PEI will work with the seller’s realtor and order a home inspection and appraisal for the Property before purchase.

  Should all conditions be satisfactorily met, Finance PEI will enter into an agreement to purchase the said Property, subject to the successful applicant entering into a Rent-to-Own Agreement with Finance PEI.

Rental Period

The approved program Participant will be required to enter a 5-year Rent-to-Own agreement with Finance PEI.

Rent payable to Finance PEI by the Participant during the 5-year term will be based on:

• The purchase price of the program eligible property (plus taxes, closing and legal costs) at a fixed 5% interest rate and amortized over a period of 25 years; and,
• Any additional rents that are required to cover property costs that are the responsibility of the Participant (property taxes and municipal charges associated with the property);
• 40 per cent of the equivalent interest portion in rent paid by the Participant to Finance PEI, to a maximum of $33,117, will accrue in favour of the Participant as a Downpayment Credit, which may only be used by the Participant when exercising their Purchase Option from Finance PEI.

The Participant will be responsible for:

• all utilities and services associated with the Property, including electricity, oil and propane, internet, telephone, grass cutting, and snow-removal; and,
• all further and additional maintenance and household improvements at the Property, including the purchase, installation, construction or repair of any appliances (built in or otherwise), landscaping, walkways, decks, blinds, curtain rods, drapery hardware, or other fixtures not otherwise included with the Property at time of purchase by Finance PEI

Final Steps

• Provided that the terms of the Rent-to-Own Agreement are maintained in good standing, by the completion of the 5-year term the participant may exercise their Purchase Option by obtaining mortgage financing from a financial institution to purchase the property.
  • If the Participant does not exercise their Purchase Option in accordance with the Rent-to-Own Agreement, the Participant will be required to vacate the property at the completion of the 5-year Rent-to-Own term.
• When the Participant is exercising their Purchase Option, the purchase price payable to Finance PEI for the Property shall be determined by Finance PEI and shall be made up of:
  • The initial purchase price of the Property paid by Finance PEI (including initial real property transfer taxes, closing and legal costs incurred by Finance PEI), less any Purchase Price Credits that have accrued to the Participant; and,
  • Any further adjustments for repairs of a capital nature to the Property and paid for by Finance PEI.
• To assist the Participant to exercise their Purchase Option, the Downpayment Credits that have accrued to the Participant are to be used towards the cash down payment required to obtain mortgage financing to complete the purchase from Finance PEI.

Program Duration

Applications under the Rent-to-Own Program will be accepted until the earlier of:

• The date that the authorized allocation under the program has been fully committed; and
• November 30th, 2024.

Other Information

• The Province has committed $17,500,000 to help Participants have the ability to purchase a home on PEI.
• The Rent-to-Own Program is administered by Finance PEI, a Provincial Crown Corporation.
• Applications are available at Finance PEI, 94 Euston Street 2nd Floor in Charlottetown

Where can I find more information?

If you have any further questions, they may be directed to:

Logan O’Donnell, Financial Analyst
Finance PEI
94 Euston Street, 2nd Floor
Charlottetown PE C1A 7M8
P: (902) 569-7550
Email: RTO@gov.pe.ca