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.
If there were no interest rate, determining your monthly rate would be simple: divide the loan amount by the number of payments ($250,000 / 360 = $694.44). Obviously the bank has to make money so the mortgage comes with a 5% interest rate. It is important to note the 5% is an annual interest rate.