There are many different RTO Lenders that offer different types of Rent to Own products.
In this post, I will be discussing the general process in which you would take when you enter into a Rent to Own Agreement, as well as the timeline, fees, and other considerations involved.
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Always remember with a mortgage – You own the property.
- Typically with an RTO, the RTO Company sets up the investor to buy the property for you.
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RTOs come with fees.
- They can range and are the same as the mortgage fees. Sometimes 1% to the RTO Company on behalf and for the lender, and 1% to the brokerage for setting up the RTO agreement, and working as a liaison to have an exit strategy ready.
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An Exit Strategy is a must
- With an RTO Company, the contract generally ranges from 1 year to 3 years.
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Upon the contract end date, you must exit this with a proper mortgage.
- Meaning, that you must now purchase the property back from the RTO’s “Lender”.
Typically, payments are calculated by way of interest with a top-up of an additional amount of money. There are many different ways to calculate this, and most companies differ. In the end, you have interest and a deposit in your payment. The deposit gets saved up as a credit toward your contract in the end.
Down payments can range from 5% to 10%. This down payment is considered your deposit, and goodwill. Meaning, the cost of the contract, and is credited along with your payment credits.
RTOs can get confusing, so please talk to a Mortgage Broker/Agent before getting too far into a contract that you don’t understand. If there are fees, understand them, the amounts, and why they are being charged. Get pre-approved for your Rent To Own today!
