I am trying to compile a comparison between Vendor Finance and Traditional Finance to show prospective wrapees so that they can make an informed decision. Here is a start. Any more thoughts from Forum contributors will be most appreciated.
Advantages
Easier to qualify for compared to traditional finance
Can work with a lower deposit
Can settle anytime without penalty (unlike some traditional finance)
Assistance from Wraper with purchase price negotiation when buying a specific property
No mortgage insurance like traditional finance if greater than 80% LVRDisadvantages
More expensive than traditional finance
First home owners don’t benefit from stamp duty exemptions as it is paid for by the Wraper and passed on as a closing cost
Wraper has a mark-up on the property priceCheers
PyramidHi Pyramid
In your Disadvantages list you mention; “First home owners don’t benefit from stamp duty exemptions as it is paid for by the Wraper and passed on as a closing cost”
In NSW wrapees receive the stamp duty exemptions and access to the FHOG on exchange of the Instalment Contract (if they are first home buyers).
Would you mind explaining what you mean by; “as it is paid for by the Wraper and passed on as a closing cost”?
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Pyramid
Paul beat me to it pointing the Stamp Duty error.
Don’t now which State you are in but a lot of our deals in Qld have No Deposit let alone little deposit.
Flexibility is another one whereby you can tailor the product to suit i.e Instalment contract or License to Occupy. If LTO purchaser may still be entitled to rental assistance.
I disagree that it is always more expensive than traditional finance. have a look at what HLP, Bluestone, Liberty etc are charging on a 95/100% deal with defaults or past Bankrupcy. Assuming they will go that high anyway even with secondary mez private finance.
If you are looking at wrapping in Qld i am happy to let you have a copy of our Q & A we send out to all of our Vendor Finance enquiries we receive.
Richard Taylor
Residential & Commercial Finance Broker
Ph: 07 3720 1888
[email protected]Richard Taylor | Australia's leading private lender
A major disadvantage is that the wrapee does not have the title to the property until all payments are made. If the wrapper finaces finacial problems, they might not be able to deliver clear title to the wrapee.
In traditional finance, the mortgagee has the titlle from day one!
We buy properties in Adelaide. No Agent Fees.
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phone 0412 437 582Hi Paul
In response to your question
“In your Disadvantages list you mention; “First home owners don’t benefit from stamp duty exemptions as it is paid for by the Wraper and passed on as a closing cost”In NSW wrapees receive the stamp duty exemptions and access to the FHOG on exchange of the Instalment Contract (if they are first home buyers).
Would you mind explaining what you mean by; “as it is paid for by the Wraper and passed on as a closing cost”?”
In NSW, if I buy a property for a wrapee, say for $300k, I will have to pay the stamp duty on it (say $8k). So my closing costs will be $308k plus other costs. Say, I add my mark up and onsell the property on a wrap at $340k. The wrapee (FHOG qualifier) does not pay a stamp duty on the $340k but has in effect paid it on the original purchase of $300k. Hope this makes sense.
Cheers
PyramidPyramid, I think you will find wrappees will also ahve to pay stamp duty on their purchase (within 3 months of exchange in NSW) of $340,000 – unless they are first home owners.
Terryw
Discover Home Loans
Parramatta
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In Qld within 30 days from that date of the Contract going uncondition unless exemption applies as a FTB under threshold but other wise you pay it on the $340K.
Richard Taylor
Residential & Commercial Finance Broker
Ph: 07 3720 1888
[email protected]Richard Taylor | Australia's leading private lender
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