KNOW YOUR OPTIONS WHEN TRADITIONAL LENDING DOESN’T WORK

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
Example House
$400,000.00
Traditional B Lending
Private Lending
Rent To Own
Terms:
1 year
1 year
3 – 5 year
15% down
10% down
5% down
GDS/TDS = 40/50
GDS/TDS = N/A
GDS/TDS = Yes
Assumed Monthly Expenses:
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
Lender Legal Fees
$-
$1,200.00
$1,200.00
Borrower Closing cost
$6,000.00
$6,000.00
$6,000.00
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
First Interest Rate:
3.75%
7.99%
0.70%
Monthly Payments
$1,889.00
$2,397.00
$2,660.00
2nd Interest Rate:
3.75%
12.99%
N/A
Monthly Payments
$125.00
$649.50
$-
Monthly Payment:
$2,014.00
$3,046.50
$2,660.00
BORROWER MONTHLY PAYMENTS: (Incl. Assumed Monthly Expenses)
$2,922.33
$3,954.83
$3,568.33
PROS
CONS
PRIVATE
•  Title under Borrower
•  High Interest Rates
MORTGAGE
•  Home Ownership right away
•  High Cost Of Borrowing
•  No GDS/TDS Requirement
•2 High interest mortgages
•High Risk of Default
•No Insurance op ons provided
RENT TO OWN
•  Apprecia on capped at 3% per year
•  Title under Investor/Company
•  Equity Increased at  time of borrower take over of  title.
•  GDS/TDS requirement within reason – must make sense.
•  Low Down Payment Requirements
•  Debt Consolida on Programs
•  Credit Mentoring Programs
•  Low Cost To Borrow
•  Low Risk of Default
•  Job Loss Insurance
•  Life and Disability Insurance
*Broker Fee may be higher depending on the complexity of the RTO.

For further information, send email to: support@rtohomeweb.com

 

Publication Courtesy: Liz Young, Search Realty and RTO Home Web

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