Here are some quick formulas to help you determine if you can purchase a home under our Rent to Own program.
We require at least a 3% Non-Refundable Option Consideration to start the process.
This is far less that you would have to pay if you were to get a Conventional Mortgage with a bank!
It is also far less than the amount Realtors add to the purchase price of the house on MLS to compensate the sellers for their 6% commission.
This Fee helps cover lawyers’ fees, contract fees, investor fees, credit reporting fees, and 2 years of property accounting and management. It also helps you qualify for future loans, since you get this refunded once your purchase the home. It is actually helping you to pay this fee!
Think of this a as a Forced Savings Plan. This 3% gets credited towards the purchase of the Home. The generous 20%-40% monthly payment credits, also get credited when you purchase you Home.
On closing, you should have ample credits to be used as a Down Payment, and help you qualify for permanent financing.
The Formula to find out how much 'House' you can afford to buy on our Rent-To-Own Toronto Program, is as follows:
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So if your combined family income is $8,000 per month, then using the above formula:
($8,000/mo ÷ 3) - $70/mo heat - $150/mo Property Taxes = $2,446/mo
So you would be able to afford $2,446 per month for your house payment.
" Amortized at 5% for 25 years, this means that you can own a home valued at $418,412 under our Rent-To-Own Program!
" Amortized at 5% for 30 years, this means that you can own a home valued at $455,644 under our Rent-To-Own Program!
" Amortized at 5% for 35 years, this means that you can own a home valued at $484,656 under our Rent-To-Own Program!
The longer your amortization period, the more 'House' you can afford.
We have established how much 'House' you can afford. We now need to know if you can afford the payment to support his house. This is called TOTAL DEBT SERVICE RATIO (TDS).
TDS is what Banks and Lending institutions will look at. It tells them if you can afford the payment to support the purchase of your House. 40% or less, is usually acceptable.
TOTAL DEBT SERVICE RATIO (or TDS), is defined as follows:
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Lets say your monthly expenses are as follows:
-Credit Card payments $200/mo
-Personal Loan $100/mo
-Car Loan $250/mo
- House Payment $2,446/mo
If your Gross Monthly Income is $8,000 per month, then using the above formula:
($200 + $100 + $250 + $2,446) ÷ $8,000 = 37%
So in this case, you are under the 40% rule, and you would have enough income to support the purchase your home.
You have now determined the purchase price of the home that you can afford!
