Okay, so I know all about the “theory” of wraps. In the States it’s called “subject-to†(although I’m sure you guys do them differently than we do in the States) but I have a question about them.
Most of the lenders in the US have inserted clauses in the note called “due on sale” or an “acceleration” clause. Basically, if someone sells their home by doing a “wrap” or even a “lease option” the mortgage lender has the right to declare that mortgage in default and demand full payment within a certain time period (usually 30 days). Basically, transferring title from one person to another without first paying off the existing loan is against the rules (but not the law).
Because of that we have had to come up with all kinds of ways to hide the transaction from the lender so they don’t accelerate the note. I was wondering if you guys have that same problem in Australia? Do lenders agree to wraps or is it something they frown on?
Peace.
Mitchell
Yep. Nearly all lenders frown on wraps, with similar clauses in the loan contracts. Most wrappers get around this by not disclosing to the lenders. As long as things go smoothly, it is unlikely to come to notice.
Similar with lease options, most banks require their permission to be given if you are writing an option on a property that is being used as security.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
You must be logged in to reply to this topic. If you don't have an account, you can register here.
