How Our Rent To Own Program Works. Information For Future Home Owners

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1 How Our Rent To Own Program Works Information For Future Home Owners

2 THE SHORT-CUT TO YOUR FAMILY S NEW HOME Move in to your family s beautiful new home NOW. Choose almost any home on the market! Follow the plan, and in 2 to 4 years you ll get a mortgage and OWN it! Don t spend the next few years renting a place that doesn t feel like home.

3 THIS PROGRAM IS FOR YOU IF YOU are self employed or an entrepreneur have a good income but a poor credit rating are in (or should be in) a consumer proposal lack an established credit history or are new to Canada have credit challenges due to recent job loss, divorce, bankruptcy or health issues you are a self-starter and will follow our application process, provide us your documents in a timely fashion, and promptly reply to and phone calls (we don t have time to chase non-serious clients) if you qualify for a 5% down payment mortgage, but don t have 5% saved up, visit downpaymentloans.ca

4 YOUR ULTIMATE GOAL IS A MORTGAGE We will first check to see if we can help you get a mortgage. If you can t (or the costs would be too high), we help you Rent To Own. Approved for a mortgage but lack the down payment? We have solutions for that at downpaymentloans.ca EquiFax score must be 560+ for 20%+ down payment mortgage, or 600+ for less than 5% down but there are several ways to get part or all of your down payment from other sources. We cannot help you get a mortgage if you are currently in consumer proposal (need to be discharged minimum 1 year), bankruptcy (need to be discharged 1 year), or in collections

5 HOW DO YOU QUALIFY TO RENT TO OWN? Income should be 30% or more of home value for rent-to-own - eg. a $280,000 home requires $80,000+ income (pre-tax); a $175,000 home requires a $50,000 income. Bad credit/no credit is OK we ll give you a plan to fix it Bankruptcy or Consumer Proposal are OK for our rent-to-own program (you must be discharged far enough ahead of the end of your lease in order to qualify for a mortgage) Paperwork: proof of income etc. - We give you the step by step plan to qualify for a mortgage when it s time to take ownership of the home. You MUST follow the plan and fix your credit while you are renting.

6 HOW DOES IT WORK? We will need your credit report from EquiFax.ca plus income proof etc. Down payment of $6,000 to $10,000 ($12,000 to $15000 if the house is worth $300,000 or more). After we ve qualified you on income and down payment, the fun part begins - house shopping! We then 1) find an investor to work with you and become your landlord, and 2) assign you a local realtor who is familiar with RTO, to help you choose almost any home that s for sale (publicly or privately). The home must be urban with up-to-date windows, roof and furnace. We will do our best to get the investor to put a winning offer on the home you want, before someone else buys it. This is not always possible, so you may not always get your first choice of home.

7 YOUR COSTS Down payment (initial purchase credit) due 2 4 weeks before moving in Just before moving in, you pay first (and in some cases last) month s rent Every month, your lease payment consists of a Base rent amount plus a Purchase Option (down-payment-builder) Example: If your base rent is $1,500 and your purchase option is $300, you pay $1,800 a month rent, and your total purchase credit after 3 years is 36 months x $300 = $10,800 plus your initial down payment At the end of your lease, in most provinces you will have about 1.5% closing costs including Land Transfer Tax. (Some people qualify for a refund of the LTT).

8 THE RTO PARTNERS TEAM PHILOSOPHY Our lending specialists have actually gotten on the phone to underwriters to fight for mortgage approvals for our clients. Whether we re getting you a mortgage now, or at the end of an RTO lease, this is crucial. If a mortgage is not possible, our lender tells us how many years of rent-to-own will be required for you to qualify for a mortgage. We won t put you into a rent-to-own if you cannot succeed at buying the property. We prefer to work with our familiar realtors. We have RTO clients who ve tried other companies and gotten terrible service from their realtor, or hired their own realtors who do not understand RTO and do nonsensical things such as putting offers in (the investor buys the house, not the tenant!) Our team rarely bills you directly. By agreeing to work with our team s lender and realtors, we can continue to provide the best possible service. We quickly determine the team (lender, realtor, etc.) you will be working with, sometimes in our first phone call. Using our selected team members is crucial to the service we provide. For our mortgage clients, we have a fantastic team that understands creative real estate techniques to help you get approval where other brokers may fail, and many techniques to help you out if you do not have the savings to pay a 5% to 20% down payment. When our lending team is using creative strategies to help you get your home, we make sure to use a realtor who gets it. We encourage your feedback to make sure that our team is providing you excellent, prompt service. If anybody on our team is not providing excellent service, we will correct the matter.

9 YOUR TEAM IS YOUR ADVOCATE FROM DAY ONE

10 WE HAVE OUR OWN TEAM BECAUSE We can t get rent to own or mortgage deals done if the realtor involved doesn t understand our strategies (rent to own, seller financing, down payment loans, cash-back, etc.) We work with realtors, lenders, investors and credit specialists who listen, and know how to help you We try to avoid working with unfamiliar people who may not meet our standards of customer service. It causes a variety of unpleasant surprises (we ve got the stories to prove it)

11 WHAT WILL YOUR RENT BE? Your TOTAL rent consists partially of your purchase credit, which builds your end-of-lease down payment percentage requirement. Your rent will not change during your lease. Calculations vary from one landlord to the next the total monthly rent is usually between.0065% and.0080% of the initial house value (higher for cheaper houses, lower for expensive ones like normal rent). Please understand we can only provide you with estimates here. All of these terms are open to negotiation by both landlord and tenant prior to striking a deal. Initial House Value Approx. TOTAL Rent Purchase Credit $100,000 $800 to $1100 $150 to $200 $150,000 $1000 to $1300 $150 to $200 $180,000 $1300 to $1550 $150 to $250 $ $1400 to $1600 $150 to $250 $250,000 $1600 to $1750 $200 to $300 $275,000 $1700 to $2000 $200 to $350 $300,000 $1850 to $2200 $200 to $350 $350,000+ $2000 to $2500+ $200 to $350 Beyond $300,000, rent and purchase credits vary ask for details. Most investors prefer to stay under $300,000.

12 BUYING YOUR HOME Your purchase price after 1-4 years is pre-determined. If you wish, you can buy the house at pre-determined pricing at ANY time during your tenancy. Buy-out pricing is based on an annual appreciation of usually 3% to 4%, added to the initial price the landlord pays for the house. The first round of appreciation applies to day 1 day 365 of your lease, the second round applies to day 366 to day 730, and so on. You acquire your own mortgage and officially buy the house from your landlord in a private sale (no realty fees, usually). You will have built up a down payment of usually about 5% - 10% of your end-of-lease purchase price. If your down payment requirement for a mortgage exceeds the credits you ve built up during your RTO lease, you will need to have saved the extra funds to make up the difference when you apply for your mortgage. Your Purchase Option Contract (separate from your lease) obligates your landlord to sell the house to you at ANY time during your lease (a first-year buyout may sometimes be disallowed). In addition to building a minimum 5% down payment (your purchase credits), you will pay Land Transfer Tax, your lawyer, and other fees when you get your mortgage, which realtors usually estimate at 1.5% of the home s value. LTT refund info.

13 RTO IS A WIN-WIN FOR LANDLORD AND YOU Landlords are fed up with tenants who don t respect their properties RTO tenants have pride of ownership and a greater sense of responsibility (not to mention better income and personal qualifications) Landlord earns small annual appreciation included in the buyout price (Note: your landlord will of course buy the house as cheaply as possible at the outset) If your buyout price is slightly less than future market value, this is free equity to you If your buyout price is slightly more than future market value, you ve still gotten out of the rental game and transitioned into ownership of a permanent family home years ahead of schedule. Also remember that your landlord, not you, is paying 3-5% interest on their mortgage while you are renting The rent-to-own process gives you personal hands-on mortgage qualification assistance, credit repair and access to great lenders. Credit repair combined with home ownership gives you a dramatically more powerful financial position At buyout time, your private purchase has $0 real estate fees, saving you $5,000 to $10,000 in most cases You re paying only slightly higher than normal rent (and getting credit), while the landlord pays mortgage principle and interest and property tax during your lease Landlord also pays all up-front real estate fees, usually $5,000 to $10,000 Your family avoids repeatedly moving from one house to another

14 YOUR RESPONSIBILITIES Your lease will describe your duties... Lawn care, snow removal General maintenance Rent payment schedules Consequences of late rent payments Deductibles for damages, appliances etc.

15 YOUR PROTECTIONS Your Lawyer is your first line of defense to review the deal, review your contracts, and provide their professional advice and experience Mortgage agent, mortgage industry laws, professional code of ethics Realtor, real estate industry laws, code of ethics in many deals, a realtor is also involved in the process of finding the investor, and negotiating for you Tenant and Landlord Acts, by province Purchase Option Contract prevents owner from attempting to sell home, change title ownership etc. Lease Agreement standard protections

16 WHAT IF I FAIL? We ask tenants to take their end-of-lease mortgage qualification seriously. There is a plan which must be followed. Credit repair steps and goals will be made clear. But Stuff Happens so if needed, you can ask your landlord to add time to your lease or ask for vendor financing. Any such arrangements are strictly between you and your landlord. Down payment credits are non-refundable. If they were refundable, your landlord will usually end up losing money when the lease ends. If your landlord loses title to the property for any reason, they DO owe you your down payment credits back. Compare to a Car lease: down payment and monthly payments most of what you pay is interest, not purchase credit, and you then buy the car at often above blue book value or do it all over again with a new car, again and again. The real question is What is your comfort level?. It is up to YOU to decide whether you believe you are 80%, 90% or 99% certain that you can follow the plan and get your mortgage and whether or not that number fits your risk profile.

17 DISCLAIMER AND LEGAL INFO The terms of this disclaimer must be accepted to access and use RTO Partners documents or join our updates list or use any RTO Partners web site content or standalone document. This document is an interest seeking document only. No information, forward looking statements, or estimations represent any final determination. This document is for general information purposes only. While the information presented in this investor interest seeking document has been researched and thought to be reasonable, in general, real estate investment is highly speculative, real estate values can go up or down, and thus RTO Partners AND/OR ITS AGENTS CANNOT AND DO NOT GUARANTEE ANY RATE OF RETURN OR MARKET VALUATIONS OF ANY PROPERTY AT ANY TIME. User of this document acknowledges and agrees that RTO Partners and/or its agents are not in the business of real estate consulting and are not classified, or presenting themselves, as real estate experts, professionals, or developers but preliminary information providers. The reader further acknowledges and agrees that RTO Partners does not assume and hereby disclaims any liability to any party for any loss or damage caused by the use of the information contained herein or errors or omissions in the information contained in this investor interest seeking document to make any investment decision in the venture referred to herein, whether such errors or omissions result from negligence, accident or any other cause. Note, however, that buyer participation is secured by agreements including but not limited to a lease agreement and a purchase contract. Buyers should conduct their own investigations, analysis, due diligence, draw their own conclusions, and make their own decisions. Any areas concerning taxes or specific legal or technical situations should be referred to lawyers, accountants, consultants, realtors, or other professionals who are licensed, qualified or authorized to render such advice. IN NO EVENT SHALL RTO Partners AND/OR ITS AGENTS BE LIABLE TO ANY PARTY FOR DIRECT, INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER ARISING OUT OF THE USE OF THE INFORMATION CONTAINED HEREIN.

18 MOVING AHEAD... Visit our web site or contact us any time to complete an application or ask us questions. Toll-Free:

19 ADDITIONAL TOPICS... Rent-backs: (accessing your equity by selling your house to a landlord, renting for a few years, then buying the house back) see Debt Relief: even if you don t decide to do RTO, most of our clients have some debt problems, and should visit to find out what most credit counselors and trustees will not tell you and maybe lower your debts by 50%-70%.

20 SPECIAL TOPIC BLOG POSTS