Hey,
I was wondering if someone can explain the senario on pg162 & 163 of 0 to 130. Steve is talking about asking the vendor to carry back a five year second mortgage of $50,000. Does that mean the vendor is wrapping or are we buying a second mortgage? I can see the benefits but I dont fully understand whats happened. Any help would be appreciated.
Thanks ShellyHiya Shelly
If the vendor will ‘take back’ a second mortgage, what it means is that you now have two loans on the property, and hopefully didn’t have to come up with much of your own cash.
It is not wrapping, as your name is on title, and you’ve got a normal loan from a bank. Basically the vendor is taking an IOU from you for that extra $$ that the bank won’t lend you. You agree to pay x in interest, and to pay it back in (probably) a couple of years.
Cheers
MelIt would be a second mortgage and registered as one. Terms would be decided between yourself and the vendor.
Some terms would be at 7 -10% p/a depending on the vendor.
For the vendor, this beats putting it in the bank at 4% or what ever may be the case.
The second mortgage differ’s from vendor finance as the property would be in your name secured by 2 mortgages. The 1st by your lender, the 2nd by the vendor. So, you have two loans, two repayments.
Whereas with vendor finance the property stays in the vendors name until last payment or refinance.
If you are considering a second mortgage there are companies that can provide them at approx 10% p/a, with high LVR’s. Otherwise a better approach would be with a non-refundable gift from the vendor (gift back).
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