Hi,
Use this thread to post questions to the topic discussed in the December edition of Insider (being sent out on 30/12/2004).
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Steve, in my experience with low or no docs financing the lender always wants to see proof of funds to complete. Therefore if you are getting the vendor to finance part of the deal, how is this going to stack up with your financier? Isn’t he going to now see you paying a second mortgage to the vendor for whatever time frame and therefore affecting your DSR with him?? Obviously deals have been done like this before, but the only one I have done was with a unit block where the developer and the bank worked hand in hand, not on stand alone deals.
The 2nd Big Mac
I usually just get a letter to comfirm i have funds too complete and that is usually sufficient for the bank.
the letter basically states i have funds available on call with someone signed by that someone.
Byronent
Adelaide SAYou can also use a ‘gift’ letter.
When only borrowing 80% from a lender, it is rarely a problem.
I am wondering where the figures are for the wrap and lease option calculations.
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdHi,
As promised, here is how the wrap figures are ‘crunched’:
Based on:
Purchase Price: $100,000
Deposit: $10,000
Vendor Finance: $90,000
Interest Rate: 9% per annum, or 0.001730769 per week
Term: 1300 weeks (25 years)
Payment at end of period
(solve for) PMT = $193.51Loan Schedule:
These numbers are from a simple spreadsheet that solves for PMT (finance function) and then plugs that figure back into a loan amortisation schedule.
#, Payment, Principal, Interest, Balance
0 0 0 0 $90,000.00
1 -$193.51 $155.77 -$37.74 $89,962.26
2 -$193.51 $155.70 -$37.81 $89,924.45
3 -$193.51 $155.64 -$37.87 $89,886.57
4 -$193.51 $155.57 -$37.94 $89,848.63
5 -$193.51 $155.51 -$38.01 $89,810.63
6 -$193.51 $155.44 -$38.07 $89,772.56
7 -$193.51 $155.38 -$38.14 $89,734.42
8 -$193.51 $155.31 -$38.20 $89,696.22
9 -$193.51 $155.24 -$38.27 $89,657.95
10 -$193.51 $155.18 -$38.34 $89,619.61
11 -$193.51 $155.11 -$38.40 $89,581.21
12 -$193.51 $155.04 -$38.47 $89,542.74
13 -$193.51 $154.98 -$38.53 $89,504.21
14 -$193.51 $154.91 -$38.60 $89,465.61
15 -$193.51 $154.84 -$38.67 $89,426.94
16 -$193.51 $154.78 -$38.74 $89,388.20
17 -$193.51 $154.71 -$38.80 $89,349.40
18 -$193.51 $154.64 -$38.87 $89,310.53
19 -$193.51 $154.58 -$38.94 $89,271.59
20 -$193.51 $154.51 -$39.00 $89,232.59
21 -$193.51 $154.44 -$39.07 $89,193.52
22 -$193.51 $154.37 -$39.14 $89,154.38
23 -$193.51 $154.31 -$39.21 $89,115.17
24 -$193.51 $154.24 -$39.27 $89,075.90
25 -$193.51 $154.17 -$39.34 $89,036.55
26 -$193.51 $154.10 -$39.41 $88,997.14
27 -$193.51 $154.03 -$39.48 $88,957.66
28 -$193.51 $153.97 -$39.55 $88,918.11
29 -$193.51 $153.90 -$39.62 $88,878.50
30 -$193.51 $153.83 -$39.68 $88,838.81
31 -$193.51 $153.76 -$39.75 $88,799.06
32 -$193.51 $153.69 -$39.82 $88,759.24
33 -$193.51 $153.62 -$39.89 $88,719.35
34 -$193.51 $153.55 -$39.96 $88,679.39
35 -$193.51 $153.48 -$40.03 $88,639.36
36 -$193.51 $153.41 -$40.10 $88,599.26
37 -$193.51 $153.34 -$40.17 $88,559.09
38 -$193.51 $153.28 -$40.24 $88,518.86
39 -$193.51 $153.21 -$40.31 $88,478.55
40 -$193.51 $153.14 -$40.38 $88,438.17
41 -$193.51 $153.07 -$40.45 $88,397.72
42 -$193.51 $153.00 -$40.52 $88,357.21
43 -$193.51 $152.93 -$40.59 $88,316.62
44 -$193.51 $152.86 -$40.66 $88,275.96
45 -$193.51 $152.79 -$40.73 $88,235.24
46 -$193.51 $152.71 -$40.80 $88,194.44
47 -$193.51 $152.64 -$40.87 $88,153.57
48 -$193.51 $152.57 -$40.94 $88,112.63
49 -$193.51 $152.50 -$41.01 $88,071.62
50 -$193.51 $152.43 -$41.08 $88,030.54
51 -$193.51 $152.36 -$41.15 $87,989.39
52 -$193.51 $152.29 -$41.22 $87,948.16
53 -$193.51 $152.22 -$41.29 $87,906.87
54 -$193.51 $152.15 -$41.37 $87,865.50
55 -$193.51 $152.07 -$41.44 $87,824.07
56 -$193.51 $152.00 -$41.51 $87,782.56
57 -$193.51 $151.93 -$41.58 $87,740.98
58 -$193.51 $151.86 -$41.65 $87,699.32
59 -$193.51 $151.79 -$41.73 $87,657.60
60 -$193.51 $151.72 -$41.80 $87,615.80
61 -$193.51 $151.64 -$41.87 $87,573.93
62 -$193.51 $151.57 -$41.94 $87,531.99
63 -$193.51 $151.50 -$42.02 $87,489.97
64 -$193.51 $151.42 -$42.09 $87,447.88
65 -$193.51 $151.35 -$42.16 $87,405.72
66 -$193.51 $151.28 -$42.23 $87,363.49
67 -$193.51 $151.21 -$42.31 $87,321.18
68 -$193.51 $151.13 -$42.38 $87,278.80
69 -$193.51 $151.06 -$42.45 $87,236.35
70 -$193.51 $150.99 -$42.53 $87,193.82
71 -$193.51 $150.91 -$42.60 $87,151.22
72 -$193.51 $150.84 -$42.67 $87,108.55
73 -$193.51 $150.76 -$42.75 $87,065.80
74 -$193.51 $150.69 -$42.82 $87,022.98
75 -$193.51 $150.62 -$42.90 $86,980.08
76 -$193.51 $150.54 -$42.97 $86,937.11
77 -$193.51 $150.47 -$43.04 $86,894.07
78 -$193.51 $150.39 -$43.12 $86,850.95
79 -$193.51 $150.32 -$43.19 $86,807.75
80 -$193.51 $150.24 -$43.27 $86,764.49
81 -$193.51 $150.17 -$43.34 $86,721.14
82 -$193.51 $150.09 -$43.42 $86,677.72
83 -$193.51 $150.02 -$43.49 $86,634.23
84 -$193.51 $149.94 -$43.57 $86,590.66
85 -$193.51 $149.87 -$43.64 $86,547.02
86 -$193.51 $149.79 -$43.72 $86,503.30
87 -$193.51 $149.72 -$43.80 $86,459.50
88 -$193.51 $149.64 -$43.87 $86,415.63
89 -$193.51 $149.57 -$43.95 $86,371.68
90 -$193.51 $149.49 -$44.02 $86,327.66
91 -$193.51 $149.41 -$44.10 $86,283.56
92 -$193.51 $149.34 -$44.18 $86,239.39
93 -$193.51 $149.26 -$44.25 $86,195.13
94 -$193.51 $149.18 -$44.33 $86,150.80
95 -$193.51 $149.11 -$44.41 $86,106.40
96 -$193.51 $149.03 -$44.48 $86,061.92
97 -$193.51 $148.95 -$44.56 $86,017.36
98 -$193.51 $148.88 -$44.64 $85,972.72
99 -$193.51 $148.80 -$44.71 $85,928.01
100 -$193.51 $148.72 -$44.79 $85,883.22
101 -$193.51 $148.64 -$44.87 $85,838.35
102 -$193.51 $148.57 -$44.95 $85,793.40
103 -$193.51 $148.49 -$45.02 $85,748.38
104 -$193.51 $148.41 -$45.10 $85,703.27
105 -$193.51 $148.33 -$45.18 $85,658.09
106 -$193.51 $148.25 -$45.26 $85,612.84
107 -$193.51 $148.18 -$45.34 $85,567.50
108 -$193.51 $148.10 -$45.42 $85,522.08
109 -$193.51 $148.02 -$45.49 $85,476.59
110 -$193.51 $147.94 -$45.57 $85,431.02
111 -$193.51 $147.86 -$45.65 $85,385.37
112 -$193.51 $147.78 -$45.73 $85,339.64
113 -$193.51 $147.70 -$45.81 $85,293.83
114 -$193.51 $147.62 -$45.89 $85,247.94
115 -$193.51 $147.54 -$45.97 $85,201.97
116 -$193.51 $147.46 -$46.05 $85,155.92
117 -$193.51 $147.39 -$46.13 $85,109.79
118 -$193.51 $147.31 -$46.21 $85,063.59
119 -$193.51 $147.23 -$46.29 $85,017.30
120 -$193.51 $147.15 -$46.37 $84,970.93
121 -$193.51 $147.07 -$46.45 $84,924.48
122 -$193.51 $146.98 -$46.53 $84,877.96
123 -$193.51 $146.90 -$46.61 $84,831.35
124 -$193.51 $146.82 -$46.69 $84,784.66
125 -$193.51 $146.74 -$46.77 $84,737.89
126 -$193.51 $146.66 -$46.85 $84,691.04
127 -$193.51 $146.58 -$46.93 $84,644.11
128 -$193.51 $146.50 -$47.01 $84,597.09
129 -$193.51 $146.42 -$47.09 $84,550.00
130 -$193.51 $146.34 -$47.18 $84,502.82
131 -$193.51 $146.25 -$47.26 $84,455.56
132 -$193.51 $146.17 -$47.34 $84,408.22
133 -$193.51 $146.09 -$47.42 $84,360.80
134 -$193.51 $146.01 -$47.50 $84,313.30
135 -$193.51 $145.93 -$47.59 $84,265.71
136 -$193.51 $145.84 -$47.67 $84,218.04
137 -$193.51 $145.76 -$47.75 $84,170.29
138 -$193.51 $145.68 -$47.83 $84,122.46
139 -$193.51 $145.60 -$47.92 $84,074.54
140 -$193.51 $145.51 -$48.00 $84,026.55
141 -$193.51 $145.43 -$48.08 $83,978.46
142 -$193.51 $145.35 -$48.17 $83,930.30
143 -$193.51 $145.26 -$48.25 $83,882.05
144 -$193.51 $145.18 -$48.33 $83,833.72
145 -$193.51 $145.10 -$48.42 $83,785.30
146 -$193.51 $145.01 -$48.50 $83,736.80
147 -$193.51 $144.93 -$48.58 $83,688.22
148 -$193.51 $144.84 -$48.67 $83,639.55
149 -$193.51 $144.76 -$48.75 $83,590.80
150 -$193.51 $144.68 -$48.84 $83,541.96
151 -$193.51 $144.59 -$48.92 $83,493.04
152 -$193.51 $144.51 -$49.01 $83,444.03
153 -$193.51 $144.42 -$49.09 $83,394.94
154 -$193.51 $144.34 -$49.18 $83,345.77
155 -$193.51 $144.25 -$49.26 $83,296.51
156 -$193.51 $144.17 -$49.35 $83,247.16Payout at the end of year three = $83,247.16
The Lease-Option figure is calculated from a third-party spreadsheet, I am not sure how the figures are calculated.
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
I’m confused. The December newsletter proposes to discuss no money down deals, yet in deal 1 Tristan puts down $10,000 and in deal 2, $5,000. Where are the no money down deals?
In deal one, with $10,000 deposit on a $100,000 property, he could have a ‘normal’ mortgage of 5% deposit and use the other $5,000 for the purchase expenses.
In deal 2, he offers $5,000 deposit and $216+ per week in rent. No positive cash flow here as even if he does sub let the property, $100,000 will, at best, buy a 1 bedroom flat which will rent for only $100 a week (local values) so he is out of pocket to the tune of more than $116 per week.
Judanne
Judanne,
The newsletter talks about no and low down deals.
You can change the numbers so that there is no deposit needed if that is what is negotiated with the vendor.
Having said that, Part Two (next month) outlines more about using external (ex-deal) OPM to bridge the gap.
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Many banks accept a second mortgage for the deposit. You must be able to service both loans tho!!!
And usually you will not be asked for proof of funds to complete at an 80% LVR.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | 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
In my experience, vendor finance is possible if you’re using standard finance. But certainly in Victoria, the lo doc lenders are EXTREMELY nervous about it! I had more than 15 lo doc lenders knock the deal back (or only offer to lend 80% LVR of 80% of the purchase price) because of vendor finance.
I’m not sure if the same is true in other states.
Bottom line – make sure you’ve got a lender who is happy with this type of thing BEFORE you find the deal!!!Keep smiling
FelicityHi, Steve,
I am just wondering do you need a solicitor to set up an option? And how does the right of the buyer of the lease-option be protected (e.g., preventing the seller from selling the house to someone else)?
KM.
Terry,
I think most people would find it pretty hard finding a second mortgage that exceeds 80% LVR.
Felicity,
Don’t present the deal to the lenders as a ‘Wrap’ and you will have no problems. Also, 80% LVR is pretty standard for low-doc. Were you saying 80% OF 80% being 64% LVR of the purchase price or was that a typo? I have never heard this being asked before from any lender.
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdHi,
I didn’t get the newsletter. I’ve checked my profiles and it says I’m subscribed to it. Any chance I could get it sent again?
Thanks,
AndrewRob
Wraps had nothing to do with it – at the time my broker and I were searching for 80% LVR lo doc finance, we were purely looking for someone who would do it with the vendor financing 20%. The best we had was an offer of 64% LVR (ie 80% of the 80%). Basically they were taking the 20% vendor finance off the price of the house, because they seemed to think that if the vendor had left money in, it must be some sort of scam, and they discounted the price accordingly.Keep smiling
FelicityFelicity,
I am interested to know, if you sell a property and leave 20% in as vendor finance, do you have to pay CGT immediately, or is it deferred as with a wrap.
Regards
AlistairSounds like a question for your accountant Alistair! I have no idea, sorry…
Keep smiling
FelicityFecility,
Wraps had everything to do with it. It was the reason for their cautiousness. If you had not told them, you could have got away with a standard 80% Low Doc.
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdThanks for the reply Felicity. I will ask my accountant. I just thought seemings as you were discussing this type of transaction you would know.
Offering to fund the deposit seems like an interesting alternative to a wrap, but you wouldn’t want to have to pay full CGT until you had received the whole amount.
Regards
AlistairRob
Obviously my last post wasn’t clear enough – wraps were NEVER mentioned in the initial stages of searching for finance. We never got anywhere, so never bothered!
I spoke to a number of lenders myself, and basically it seemed to be a Victorian thing, caused perhaps by some less than ethical seminar presenters who taught people to inflate the price of a contract and take back some form of under the table payment at settlement. Basically the lenders felt that if vendor finance was involved, that’s what was going on. I even had one valuer who commented without any hesitation that if there was vendor finance involved, he’d only value the house at 80% of the contract price – that’s what the lender he was working for had told him to do.Keep smiling
FelicityJust a note, I know Westpac apparently dislike 2nd mortgages!!! They’ve apparently called a few loans in. I don’t know if it was disclosed or not.
Rgds.
Lucifer_auOriginally posted by FW:I had more than 15 lo doc lenders knock the deal back (or only offer to lend 80% LVR of 80% of the purchase price) because of vendor finance.
Felicity,
I like to read all posts and try to post a response in context. I was just going by YOUR words.
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
You must be logged in to reply to this topic. If you don't have an account, you can register here.
