Hi All,
How exactly does a vendor deposit work?
ie. I have a house which can get a bank val of 300k.
I want to sell it to someone for 270k and supply them the 10% or 30k deposit.
Is the COS 300k or 270k? How does the bank view this?
Assuming they are fine with income but are just short on deposit.Thanks heaps for any help.
Cheers
GrantHi Grant
There would be a few ways to structure it depending on whether you want the money back or not. If you want the $30,000 back then you will need a loan agreement. The sale price will be $300,000 with a separate loan from you to the purchaser for $30,000. Banks should be fine with this as long as it is declared as many lenders now allow the deposit to be borrowed. Any repayments for the small loan will have to be considered in the serviceability calculations too.
You will also need to consider what sort of security are you going to take to protect your interests – eg 2nd mortgage – the lender will also need to give permission for this to be lodged.
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
Thanks for that Terry.
If I dont want the money back then how would it work?
If they borrow 270k and the COS is 300k, will they need the money in thier account before settlement to keep the bank happy, or can I just write a letter for the bank or something saying this amount is gifted of the price or something like that?
Is there a risk the bank may say well the sale price is 270k and ignore the valuation?Cheers
GrantIf the lender sees the vendor is gifting the deposit, they may say the real sale price is the contract price less the gift. Maybe you need a third person to gift the purchasers.
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
Place the funds in your Solicitors Trust Account and have him write a letter which the Broker can give to the lender merely stating he is holding an amount in Trust of $30K representing the deposit.
He doesnt have to say where it has come from.
I have done this on many an ocassion and lenders are fine with it.
As Terry mentions if it is disclosed to the lender that the loan is fromthe Vendor and non repayable then it is likely to reflect in an adjustment in the valuation / purchase price.
Richard Taylor | Australia's leading private lender
Thanks Richard – its starting to make sense now..
Though Doesnt the bank normally want to know where the money/deposit was from?
If the loan is from the vendor and IS repayable is that OK, ie. the valuation shouldnt be adjusted down?
I suppose the bank will also want to factor in repayments on this portion in the buyers serviceability would they?, what if its a interest free loan for say 3 years?
Cheers
Grant
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