I am interested in purchasing property through vendor finance as my borrowing capacity is limited with the banks. There are a few things I want to know before I look into this more. (FYI: Just to clarify, talking about vendor finance where someone buys the property for me, and then I buy it off them on financing terms…like a ‘wrap’)
Here are my questions:
1. Do the vendor financiers have lending criteria. The property should be positive cash flowed. So will they look at my income only or will they look at the property? What is their criteria?
2. Can you purchase the property for nothing down from them (and thus assuming a 100% LVR)
3. How much higher is the interest rates to the banks interest rates?
4. Would it be possible to refinance in 5-10 years, borrow money from the bank and pay out the vendor financier?Any help understanding these things would be much appreciated.
Ryan McLean | On Property
http://onproperty.com.au
Email Me1. Up to the person vendor financing it. I imagine most are more flexible than banks, but many will not lend to someone who intends to rent the property out.
2. Probably, but this would be rare
3. 2 to 3%
4. depends on your situation at the time and the LVR etc, but it is possible.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
Hi Ryan
We're pretty much as Terry says:
1. We only sell to owner occupiers.
2. We never sell a property with no "hurt money" from the buyer. Even if the buyer is eligible for the FHOG and is going to to use that as part deposit, we still insist on some deposit from the buyer. Without any of their real money in the transaction, in our opinion, it's just too easy for them to walk away. When people have some of their own money in the transaction, they'll fight a lot harder to make things work.
3. The advice we've received from our solicitor is that, due to Consumer Credit Code considerations, a maximum safe upper limit should be no more than approx 2.5% above the "big 4's" standard variable rate.
4. We structure our vendor finance (instalment contract) sales to positively encourage our buyers to refinance with a traditional lender as soon as they can.Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
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