Hi
We are a young couple looking to buy our first home! As you are aware the banks have gotten extremely tough. We are looking for a property in Toowoomba between $180,000 and $260,000 with 20% vendor finance. All I can find is rent to own etc. We would still like to get an 80% loan through the bank and pay the vendor interest on their 20% over 12 to 18months while we renovate and add extra value and then pay refinance, pay the vendor back 20%. We are happy to provide credit reports etc. Can anyone help us or know of anybody? I have access to RP data and have already contacted some owners of suitable properties, but haven’t been very successful.
Also as we are first home buyers if we find something before the end of september we will have an extra $14k otherwise $10k if by december.Thanks
Please advise why you cannot get finance from a traditional source ?
Is it income, credit, lack of savings etc etc etc
Most traditional lenders will not allow the 20% deposit to be borrowed even at a 80% lend so i am curious as to why you think this way would be easier.
Even though the loan in most cases at 80% or less is not mortgage insured there are other considerations which lenders will look at.
If you look at an instalment contract you will not receive the First Home Owners Grant at Settlement so i can understand why you dont want to go that way but wonder why you believe a VF loan will be easier.
Richard Taylor | Australia's leading private lender
Lack of savings basically, have good jobs earn good money. My partner has a dodgy boss which made it hard at first with pay slips etc. But we have since fixed all that. But have been told that unless we have genuwin savings of at least 3percent and 5% deposit. Also my partner had a PAID default with was $30 over the $500 limit, and the mortgage insurer said no.Other than that there should be no reason a bank wont lend to us. I’m familiar with loans etc as I’ve been a mortgage manager myself.
Ok point taken. Assumed it had to be credit or lack of savings.
Not sure you will find any lender knowingly allow the deposit to be borrowed from the Vendor these days so dropping the loan back 80% wont do you much good anyway.
Richard Taylor | Australia's leading private lender
Yeh true, wasn’t going to let them know! Will get someone to “gift” it. Thanks for your help though!
How can they gift it prior to settlement.
Lender will want to see evidence of funds to complete prior to issue of the letter of offer and secondly vendor will want to register his 2nd mortgage.
Richard Taylor | Australia's leading private lender
Hi guys
This second mortgage carry back is something I've been meaning to get into, so I've been talking with lots of people about it, but I haven't done any myself yet. I have done a bunch of instalment contracts and a couple of rent-buys though, so I've got some idea what's going on.
Also, I've got a new mortgage broker who tells me he can put these deals together – even at 90/10 – but until one happens I'll stay naturally skeptical. No idea who he'd go through though – he tells me there are a couple of options.
Anyway, I was asking everyone I knew who did them, and this "gifting the deposit" idea came up – along with a couple of other, similarly "creative" ideas. It's my understanding that the "gifting" idea means something along the lines of indicating that the deposit has been gifted by the vendor on the sales contract, and then they have a second mortgage agreement privately that the bank doesn't know about. The seller then doesn't register the 2nd mortgage until after settlement. Again, I haven't done one of these, so feel free to ask questions, but I can't necessarily answer them!
Other possiblilities I've heard… Finding a private short term lender who loans you the cash for the deposit for long enough to put it in the lawyer's trust account to show the bank it's there, then give it back with a bonus and go ahead with your 2nd mortgage agreement (again, don't register until AFTER settlement). One more…. ummmm…… oh yeah, telling the bank a relative of yours was going to gift it to you, and then them "mysteriously" not turning up with the money at settlement, and the vendor then going ahead with the 2nd mortgage option to "stop the deal falling over".
Then there's my new mortgage broker who says that some banks just plain don't mind the whole idea??
Anyway, if you want, I'll be trying to put one together in the next month or so (as a purchase) and I can let the forum know how it goes (or doesn't go!)
Also sjh, I'm based in Ipswich and while I don't have any houses out in Toowoomba, I've certainly put in offers on a few and would be happy to let you know if I ever ended up with a house out there. I'm not aware of any people familiar with these types of strategies with any property up there at the moment though.
Find me on facebook if you want to go on my buyer's list or just keep in touch. http://profile.to/andrewbuyshouses/
Good luck with it.
Andrew
Oh, and Richard, one more thing…
The people I know who do these professionally aren't as uptight as you'd think about their second mortgages. They only ever do the second mortgage from their profit, and never dip into their own capital with the second mortgage, so if it all falls over well they've lost profit, but they haven't lost any money themselves.
ie, If they buy the property for $160K (including their stamp duty and legals) then the person they sell to must come up with at least $160K up front in the form of the bank loan, and they are happy to carry back the rest, because it's all profit. I believe most of them also put a clause in the contract so that a default under the second mortgage automatically triggers a default under the first mortgage – I don't really understand how that one works, but again, I'll give you more details when I've done one.
Cheers,
Andrew
Hi Andrew
Just a couple of points:
1) I believe most of them also put a clause in the contract so that a default under the second mortgage automatically triggers a default under the first mortgage. Putting this in a mortgage contract is clearly illegal. The second mortgagee certainly has the same right of possession as the first mortgagee however clearly cannot legally place this term in a Contract.
If the First mortgage has been maintained perfectly yet the 2nd mortgage has not then the first mortgagee would not be in default and any action for possession would need to be instigated by the second mortgagee.And yes i have done dozens of them in Qld.
2) Stating on the loan application form that your being gifted the deposit from the vendor however not disclosing it as an ongoing liability it clearly a case of mortgage fraud. Yes there are certainly a number of lenders who will go to 90% or even 95% with a gifted deposit and no requirement for genuine savings however to borrow the deposit from the vendor is not an acceptable source for a mortgage insurer.
In the good old days about 6 months ago i had several lenders who did not mortgage insure their loans at all and did not mind that the vendor was keeping a second mortgage.
3) One more…. ummmm…… oh yeah, telling the bank a relative of yours was going to gift it to you, and then them "mysteriously" not turning up with the money at settlement, and the vendor then going ahead with the 2nd mortgage option to "stop the deal falling over. Again another case of mortgage fraud if i have ever seen one.
4) Like it or not you cant register your 2nd mortgage until after settlement so it is not a matter of holding off you dont get a choice.
Certainly done as a business arrangement both wrapping and second mortgages can be done with the knowledge and acceptance of lenders. For our business we started at State Credit Level and then were directed to the National Credit Dept of a couple of the major Banks who did these deals knowingly. As a one off the Banks wont touch them unless as i mentioned they are done on the sly with non full disclosure.
If you have to resort to doing business that way it i will catch up with you in the end.
Why not be Professional about the whole business and present to a lender your complete Business proposition with cash flows, assets and liabilities and a full structured plan on moving forward and assisting clients.
Richard Taylor | Australia's leading private lender
Thanks Andrew, its good to here from someone positive thats in the know about these things. I’ve actually found someone willing yesterday. They will lend the money in a separate vendor agreement where I pay interest to them etc. I get the money I have a PRE- approval from the bank, as, if you have 20% they don’t really care too much about making sure its there on a pre approval especially since lo docs and non conforming loans can be done this way also. The bank doesn’t know about the vendor finance only the solicitors which deal with it at settlement. I learnt this from someone who bought a first home like this and know has heaps of investment properties and is doing well.
So QLD007 if you want to rain on someones parade perhaps don’t post in a HELP forum. I know how it all works, my question was for someone willing to do it. And as for banks they are crooks so as long as everyone gets paid and gets their needs met WHO CARES! You need to think outside the box to become successful, which is what I’m trying to do. If it was a year or 2 a go I would of read your posts got negative and given up! It seems the only reason your on here is to bignote yourself in what you know!
The thing about this also Andrew is that I only approach people who have had their house on the market way way too long so its in their best interest to get rid of, I make the offer of my needs and how it would work and they either take it or leave it, I’m not attached to the outcome. As long as everyone has benefits.
So thanks Andrew definately post how it all goes.sjh
For someone who claims he was once in the finance industry i cannot believe you are supportive of mortgage fruad because the Banks are all crooks. What an amazing statement.
I guess an alternative is to merely pop on a balaclava and go and hold one up with a toy pistol for the 20% deposit.
That is also against the law as well but i am sure you will be proposing that on a new post.Full disclosure is required in every finance application and to get ahead you do not have to try and deceive a lender. As I mentioned why not go and fully disclose it to the lender and if they say sure then no problem.
So before you try and throw stones my friend why not read a few of 5500+ posts and see what i am here for.
Perhaps after your 11th post we will not hear from you again as i guess members like you come and go like the wind.This forum was set up and paid for by Steve for like minded property investors to share information and voice their views not to support fruad and ways people like you think they can get ahead by cheating the system.
Probably a good idea if a Mod would like to lock this post…. Jaffa where are you.
Richard Taylor | Australia's leading private lender
Andrew, please include an advertisement to your facebook and other links in your signature. Please don't casually advertise your services in post sentences.
Quote:In the left corner… Heavy-wait Queensland Financial Institutional Structural Expert. In the right hand corner Young Couple, Battler, Trier.Seriously guys all jokes aside. We diligently learn things in this post, some are nieve and some are discussions. You don't want to run the risk of financial ruin and getting caught up with illegal ways. It's difficult getting knocked back. Start saving (right today!) and go back into that bank and kick arse.
I know VF is a strategy but you will feel so good with your own honest money walking into that bank and or finding a senceable VF way that's more acceptable.
Not to many heated discussions or i may have to delete this thread.
Hehe yeh, I know! Most investors are familiar with this strategy which is why I posted it here! For help with that not finance. People who have done it etc not for an opinionator to argue. Anyway all good now! Found my answer elsewhere!
Thank god for that.
Are you off now then. Sommersoft have been warned about you so all good.
Richard Taylor | Australia's leading private lender
Hahaha ok mate, you need a muzzle. Later!
P.S relax you’ll end up with carpal tunnel and by the way soMersoft is spelt with one M.Reading your multiple 12 posts mate i can see you obviously missed the punctuation classes at school.
That's perhaps one of many reasons why you didnt cut in it in the finance industry.
Anyway stop your'e whinging and get on and start saving as Jaffa suggested.
You have a poor credit record and no money and you wonder why no-one wants to lend you a cent.
God your type make me sick. All that at 24 years of age.
Richard Taylor | Australia's leading private lender
Struth people!
I turn my back for 24 hours and it's world war three in here!!
Ok, links in my signature, got it…
Ok, Jaffa is a mod.. got that too!
I'll also remember to have someone proof read my posts for spelling, punctuation and grammar so as not to provoke the ire of either of you!
While I'm happy that some people appreciate my posts through here, please don't think I've got a problem with Richard giving his opinions on the legalities of something that I haven't even done yet myself. I'm pretty sure I even dubbed them as "dodgy" in my original post. Obviously I pay for legal advice on these things, so it would be silly of me take Richard's word as gospel on legal issues when I do have a couple of legal guys on my team. It would be equally silly (probably more so) for anyone to take anything I say as gospel either!
I would also be fascinated to know how Richard got started in this business with full disclosure, because it is my illusion that if I were a decision maker in the banking system, that someone coming up to me who had never done a wrap before, and had no financial qualifications other than being good with numbers, wouldn't get far with me, even if all his proposed figures added up and looked realistic. Did you get started in a different climate to what we're in now? Do you think the banks would really smile on someone with no experience who went in with a proposition for a wrapping business having not done any before (in this financial climate)?
At the risk of provoking Richard's ire, I will say that any sort of entrepreneurial spirit will always raise eyebrows. Richard, has anyone ever told you that wraps are illegal, or that what you do with vendor finance is not right? Has Neil Jenman ever made you mad? While I think that a lot of what goes on in this industry is "dodgy" as I said before, I don't feel it is up to me to judge the activities of other entrepreneurs just because I'm a little more old fashioned than they are. If I think they're out to get rich by screwing people over, well I'll judge them then, but not just because they're skirting around a legal system that is clearly not designed for these types of transactions.
If we're going to take the strict line on full disclosure, I (along with many other investors) would be in a lot of trouble. I know that I've moved out of houses, changed jobs, rented out houses I bought as PPRs, changed rents, changed incomes, put new tenants in, all without fulfilling my obligations under the fine print of the mortgage to inform the bank of what I was doing. If you have never done any of this, that's great, but I feel you would be in the tiniest of minorities. What then is the difference between doing any of those things without informing the bank, and selling a place under vendor finance and not informing the bank? It is my opinion that the only difference is one's subjective judgement of where their own line is as to what is and isn't acceptable to them.
While I'm on a roll, I will mention the fact that I never saved for my first deposit, and I don't believe I feel any worse for it! I received approx $65K as an inheritance as a 20 year old in 1997. My parents then pulled financial support from me (not with any ill feeling), I worked my way through Uni for the next 4 years, used some of my inheritance, and then still had enough for a new Hyundai Excel and a 20% deposit on my first house which cost $122K in 2001. I'm thinking probably a lot of 20 year olds wouldn't still have had that much left 4 years later, but I still can't claim to saving 25 grand as a deposit.
Cheers,
Andrew
Hi Andrew
Your post is confusing. On the one hand you say that you conceded that your suggestions might be dodgy but then for the rest of your post you justify why you don't see a problem with doing exactly what you have proposed.
AndrewBuysHouses wrote:At the risk of provoking Richard's ire, I will say that any sort of entrepreneurial spirit will always raise eyebrows. Richard, has anyone ever told you that wraps are illegal, or that what you do with vendor finance is not right? Has Neil Jenman ever made you mad? While I think that a lot of what goes on in this industry is "dodgy" as I said before, I don't feel it is up to me to judge the activities of other entrepreneurs just because I'm a little more old fashioned than they are. If I think they're out to get rich by screwing people over, well I'll judge them then, but not just because they're skirting around a legal system that is clearly not designed for these types of transactions.And the sort of "enterpreneurial spirit" you have suggested in your earlier post will raise the eyebrows of the bank and the police if you get caught and charged with fraud.
Richard is not a lawyer, and often states in his posts that he is not a lawyer but it is not too often that he is wrong on the legalities of money lending. I am a lawyer and I can tell you that your suggestions all amount to fraud. Yes, several people do what you have suggested but that doesn't make it right. "Everyone else does it" is not a legal defence. What you proposed was illegal and it is entirely appropriate that an experienced member of the forum points this out so that other readers know that it is illegal.
Those people in this thread who have jumped down Richard's throat should perhaps be taking a look at the level at which they are prepared to engage in criminal activities to get ahead financially, rather than attacking someone who has called fraudulent behaviour, well, fraudulent behaviour.
K
Andrew i think you have missed the whole theme of the ongoing posts.
Simply wrapping or providing Vendor Finance Terms in Qld are not illegal.
Mortgage fraud however is not in my mind entrenterpreneurial.
If you havent got a job but wanted to get ahead would you think writing out false payslips the way forward.
It is very simple the lending landscape has changed over the last 12 months or so and not necessarily for the better for certain borrowers but it falls down to risk as far as the lender is concerned.
All i am simply saying is to be creative you dont have to be deceptive.
Everyone in this room started their investing at some time and whilst I admit it is probably harder to start now with no money and an adverse credit record if you save and be honest with your lender it will get you a lot further in the future.
I appreciate this course of action will not be supported be all and there are often mortgage brokers or Bank managers that will falsify documentation just to get a deal through but i hate to say not this one.
I have stated on so many ocassions over the last 6/7 years on this forum how i got started in wrapping and it was always through full disclosure. If they are not prepared to offer it now does that not tell you something.
Richard Taylor | Australia's leading private lender
Hi again
Linar, I suspect you found my post confusing because you haven't read everything that I've said. It IS a long thread at the moment. I did make it clear that I haven't done one of these yet, and that the information I have presented is the combined suggestions of a whole bunch of people that I have spoken to. Chances are, I'll go through this new mortgage broker I've been speaking to who says that he knows lenders who are fine with it. If it doesn't work out that way, I'll probably try it again in another few months, and if that doesn't work out I would likely change my focus until the credit climate changed.
It is not about seeing nothing wrong with what other people are suggesting. There are plenty of things that friends and associates of mine do that I don't think I would ever do, but that doesn't mean I'm going to judge them for it. I guess I'm a "He who is without sin throw the first stone" kind of guy.
Like I said, I'm happy for Richard to disagree with me, or anyone else. What I would be interested in, however, is the percentage of people who are caught in mortgage fraud, who are actually charged with it. I have been told it is a very low number, but that wasn't by a lawyer. I'd love to hear either of your takes on that one. And no, just so we're clear, that does not mean that I am considering it!
Oh, BTW, I just re-read the whole forum. I totally missed our young friend's shot at Richard about "bignoting" himself, and thought Richard was abusing him because he said the banks were crooks! My apologies.
I am interested however in the "people" who have jumped down Richard's throat… I've only counted one. Am I to assume I'm the other?
Andrew
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