This is how a lease option should work: After securing the go-ahead from a mortgage broker and before moving in, your potential buyer will give you a healthy, nonrefundable deposit to go toward the down payment of the house -- typically, 3 to 5 percent of the purchase price.
The amount of interest that accrues on your loan is determined by a simple daily interest calculation: Your current principal balance Ã The number of days since your last payment Ã Interest rate factor = interest rate Ã· 365.25 (number of days in a year) = Your daily interest rate.
Add-on is actually one of the simplest of the interest methods. You just compute the total interest on the amount borrowed without regard to the repayment schedule. Thus, a loan for a thousand dollars for one year at a 17% add-on rate would come to a total of $1,170. If it were for two years, just multiply the one year interest amount by 2.