PRIVATE LENDING VERSUS RENT TO OWN
Rent-To-Own Program is still adjudged the better option to private lending when traditional lending does not work.
The sample worksheet below demonstrate how RTO works when compared to Private lending:
Property Tax: |
$2,500.00 |
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Example House |
$400,000.00 |
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Traditional B Lending |
Private Lending |
Rent To Own |
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Terms: |
1 year |
1 year |
3 – 5 year |
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15% down |
10% down |
5% down |
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GDS/TDS = 40/50 |
GDS/TDS = N/A |
GDS/TDS = Yes |
Assumed Monthly Expenses: |
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Required Downpayment |
$60,000.00 |
$40,000.00 |
$20,000.00 |
Home Insurace |
$100.00 |
First Mortgage |
$300,000.00 |
$300,000.00 |
Condo Fees |
$350.00 |
|
Second Mortgage |
$40,000.00 |
$60,000.00 |
Property Tax |
$208.33 |
|
Lender/Document fees |
$4,000.00 |
$8,000.00 |
$565.00 |
Utilities |
$250.00 |
Appraisal |
$395.50 |
$395.50 |
$395.50 |
Total Monthly Expenses: |
$908.33 |
Inspec on |
$508.50 |
$508.50 |
$508.50 |
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Lender Legal Fees |
$- |
$1,200.00 |
$1,200.00 |
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Borrower Closing cost |
$6,000.00 |
$6,000.00 |
$6,000.00 |
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Broker Fees |
$1,700.00 |
$3,400.00 |
$ 4,000.00 |
$1%* |
|
Total Cost of Borrowing: |
$72,604.00 |
$59,504.00 |
$32,669.00 |
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First Interest Rate: |
3.75% |
7.99% |
0.70% |
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Monthly Payments |
$1,889.00 |
$2,397.00 |
$2,660.00 |
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2nd Interest Rate: |
3.75% |
12.99% |
N/A |
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Monthly Payments |
$125.00 |
$649.50 |
$- |
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Monthly Payment: |
$2,014.00 |
$3,046.50 |
$2,660.00 |
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BORROWER MONTHLY PAYMENTS: (Incl. Assumed Monthly Expenses) |
$2,922.33 |
$3,954.83 |
$3,568.33 |
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PROS |
CONS |
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PRIVATE |
• Title under Borrower |
• High Interest Rates |
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MORTGAGE |
• Home Ownership right away |
• High Cost Of Borrowing |
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• No GDS/TDS Requirement |
•2 High interest mortgages |
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•High Risk of Default |
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•No Insurance op ons provided |
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RENT TO OWN |
• Apprecia on capped at 3% per year |
• Title under Investor/Company |
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• Equity Increased at time of borrower take over of title. |
• GDS/TDS requirement within reason – must make sense. |
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• Low Down Payment Requirements |
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• Debt Consolida on Programs |
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• Credit Mentoring Programs |
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• Low Cost To Borrow |
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• Low Risk of Default |
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• Job Loss Insurance |
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• Life and Disability Insurance |
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*Broker Fee may be higher depending on the complexity of the RTO. |
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For further information, send email to: support@rtohomeweb.com
Publication Courtesy: Liz Young, Search Realty and RTO Home Web
RTOHomeWeb.com 