Rent to Own is Smarter than Buying!

(Using RTO Home Solutions Rent Credit Programs)

 

Call Sam at (647) 287-4500 or email rtohomesolutions@rogers.com

 

I recently had a conversation with a friend regarding RTO Home Solutions rent credit program and it occurred to me that RTO Home Solutions 100% rent credit program is the most advantageous means of purchasing a home for any home buyer. It really is better than buying and getting a mortgage right away!

How can I possibly make such a bold and powerful statement? How can this possibly be true?

Well if you look at the numbers, and we will in this article, RTO Home Solutions 100% rent credit program will save a tenant/buyer thousands of dollars in the first year of the lease option, compared to a traditional mortgage. If this amazing program sounds interesting, call me any time of day or night at (647) 287-4500 or email me at rtohomesolutions@rogers.com.

Let’s continue looking at the numbers:

In the “traditional” purchase of a home, the homebuyer will, more often than not, get a conventional mortgage from a bank or some other lending institution. The table below is the payment schedule for the first year of a $300,000 mortgage, amortized over 25 years, at a (historically low) 4% interest rate. The monthly mortgage payment is $1578.06.

Table #1  Mortgage payment in the first year of ownership on a $300,000 mortgage

Period		Total Paid	Interest	Principal	Balance
Month:	1	$1,578.06	$991.77	$586.29	$299,413.71
Month:	2	$1,578.06	$989.83	$588.23	$298,825.48
Month:	3	$1,578.06	$987.88	$590.18	$298,235.30
Month:	4	$1,578.06	$985.93	$592.13	$297,643.17
Month:	5	$1,578.06	$983.98	$594.08	$297,049.09
Month:	6	$1,578.06	$982.01	$596.05	$296,453.04
Month:	7	$1,578.06	$980.04	$598.02	$295,855.02
Month:	8	$1,578.06	$978.06	$600.00	$295,255.02
Month:	9	$1,578.06	$976.08	$601.98	$294,653.04
Month:	10	$1,578.06	$974.09	$603.97	$294,049.07
Month:	11	$1,578.06	$972.09	$605.97	$293,443.10
Month:	12	$1,578.06	$970.09	$607.97	$292,835.13
Year 1 Total		$18,936.72	$11,771.85	$7,164.87	$292,835.13

Before we begin with the analysis of the numbers above, a note must be added regarding the down payment that is usually required to purchase a home and attain a conventional mortgage. In Canada, a buyer requires a minimum down payment of 20% and a solid credit rating to get an uninsured mortgage. This insurance fee can add thousands of dollars to the mortgage on the property. Therefore, a down payment of approximately $75,000 is required to get a mortgage of $300,000 (20% Down payment) without this added insurance. That is an excessive amount of money to put down for the privilege of getting into a home.

The above table demonstrates that in the first year of a mortgage a home owner actually makes a total of $18,936.72 in mortgage payments. However, only $7,164.87 actually goes towards paying off the balance or the principal of the mortgage. That’s right, only 38% of your annual payments go toward the principal in the first year. That means 62% of your payments go towards the interest on the mortgage and are not serving you or your finances well. All this does is make the banks solvent and you less so!

Lest we forget that there are other payments/expenses like the closing costs, property taxes, and property insurance that are required when you buy a house. These expenses will also run you into the thousands of dollars and do not go towards the purchase price of the home. Therefore, at the end of year 1, a person will make over $20,000 in payments to buy and carry a home and a meagre $7,164.87 goes towards the $300,000 owing.                                                                   

 

 

Table #2 First Year Expenses as a home buyer using the example above

(Example listed below is for illustrative purposes only)

 

Mortgage Payments                                                             $18,936.72

Estimated Property Taxes (annual):                             $2,500.00

Closing Costs:                                                                          $1,000.00

Property Insurance (annual):                                           $500

Total Payments:                                                                       $22,936.72

Total Remaining on the mortgage after one year:      $292,835.13

 

A total of 31% of all payments made in this example went to the principal amount owed on the house. It is no wonder so many people today rent homes as opposed to buying.

The dirty little open secret of traditional renting is that the landlord does not pay for any PITI (Principal, Interest, Taxes, and Insurance) on the property. Rather it is the tenant that pays all these costs for the landlord through his/her rent. It is no different in a rent to own agreement in which the tenant/buyer must pay rent on a monthly basis and this rent will cover all the PITI costs of the landlord. The BIG difference is that in a lease purchase deal with RTO Home Solutions these payments may be credited up to 100% towards the purchase price of the home[1]. That’s right, all those payments described above actually go towards the purchase price of the home. It is actually beneficial for a tenant buyer to pay a higher than market rent because all, or a substantial percentage, of that money may be credited towards the purchase price of the home. The owner of the house does not even have this advantage. It really is a winning scenario for the tenant/buyer.

In addition to the great advantages listed above, another fabulous feature of RTO Home Solutions programs is that the non-refundable option consideration money[2] required (usually 2.5% to 10% of the purchase price of the house) is considerably less than a down payment on a traditional mortgage and may be credited up to 100% towards the purchase of the home. That’s right! No mortgage, government insured fees, mortgage fees, etc during the lease option period. The only extra requirement is that the tenant/buyer gets renters insurance for their own protection.

Table 3: Comparison between Lease Purchasing and Mortgage payments for the first year                 

 (Example listed below is for illustrative purposes only)

One year payments on a purchased property		VS	One Year payment on a 100% rent credit Lease Purchase with RTO Solutions
Mortgage Payments (1578.06*12)	$18,936.72		Rent payment ($1700*12)	$20,400
Estimated Property Taxes (annual)	$2,500.00		Renter’s Insurance	$400
Closing Costs	$1,000.00
Property Insurance (annual)	$500
Total Payments	$22,936.72		Total Payments	$20,800
Total paid down on the mortgage after one year:	$292,835.13		Total paid down on the $300,000 purchase price after one year (not including the option consideration money):	$279,200

 

After a one year lease term with RTO Home Solutions the tenant buyer actually pays down the purchase price of the home faster than a buyer of a home with a mortgage. As table 3 demonstrates, the tenant buyer actually spends less money in the first year but puts more money towards the purchase price of the home.  Upon completion of the lease option period it is the responsibility of the tenant/buyer to secure financing or a mortgage for the total remaining (in this example $279,200), from a bank or other lending institution, to complete the sale of the home.

Lease Option rent credit programs are actually set up to give tenant buyers of all credit worthiness the opportunity to own their home quicker. Many people often think that tenant/buyers in lease purchase deals all have bad credit and cannot get conventional mortgages. This is not necessarily true. Especially with the 100% rent credit program, lease purchasing is for smart future home owners that wish to save money and pay down the purchase price at an accelerated rate before buying the home and getting a mortgage from a bank or mortgage broker.

RTO Home Solutions also offers other generous rent credit options for prospective buyers with credit issues or a smaller amount of lease option money. Lease Purchasing with RTO Home Solutions is actually the smart move for all prospective tenant/buyers that aspire to being home owners one day.

It must be noted that RTO Home Solutions does not give or guarantee mortgages. RTO Home Solutions is not a bank or mortgage lender. The RTO Home Solutions Lease purchase program simply credits the rent money paid to the purchase price of the house. This piece of writing is not meant to infer, in any way, that RTO Home Solutions gives mortgages or warrants a mortgage at the end of the lease term. It is the responsibility of the tenant/buyer to attain a mortgage, if required, from a lender to purchase the home at the end of the lease option period.

Sam Giuliano is a lease purchase specialist with RTO Home Solutions in Ontario, Canada. RTO Home Solutions is a North American company that makes lease purchase deals across Canada and the USA. If you require further information on lease purchasing deals with RTO Home Solutions or wish to take advantage of a fantastic opportunity please contact Sam at (647) 287-4500 or at rtohomesolutions@rogers.com. In addition, please visit http://rtoanswers.com/.

 

 

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1 The 100% rent credit is contingent on approved credit, terms, and the tenant paying the rent on time every month. If a rent payment is not made on time, for any month, than the rent credit is not applied for that month.

[2] Option Consideration is a non-refundable sum of money a tenant buyer puts down to gain the option of purchasing the home at the end of the lease option period. This option consideration money is usually credited towards the purchase process of the home.