vendor finance cops a floggin!

Hi

I disagree I thought the report was fairly balanced.

The wrapper in question, made no bones that it was a business and that he would kick people out who didnt pay. (He could have been a bit more eloquent about this point). The fact of the matter is that, this is the reality.

All in all, I think the report portrayed the rewards/downfalls vs the potential risks of vendor finance accurately and wasnt the normal beat up of wrapping.

The mortgage company in question
http://www.new-loan.com.au do provide 100% loans on the following conditions.

Perfect credit history
Ability to pay; ie should have a job
Wrappees still need 3% in savings over a period of 3-6 months (ie a savings record) to pay for MI etc; so effectively they still need a deposit!!!

However interest rates are very competitive in the low 6’s…

I believe that they also provide 97% loans (rather than the normal 90%)for investors so are worth having a look at?!

I would be interested if anyone with a mortgage broking background can explain how this company is able to provide these products.

Cheers

David U

David

My company (the one I work for that is) also has this product, the 100% lend.

There are other conditions on this loan as well:
• Must be their only property
• Must be less than $300,000 for Sydney property, $250,000 in Melb $200,000 elsewhere
• Must have 3% savings (genuine savings over 6 months)
• LMI is 2.6% of purchase price!

The LMI company is taking all the risk, and is charging accordingly.

Terryw
[email protected]

Sounds like this article?
http://www.jenman.com.au/NewsArticles1.php?id=1

This thread will be deleted soon because it goes against what Steve is trying to sell, but i’ll post it here again for those who may not have seen it. I posted a thread about it a week ago, but it was promptly deleted so you may not get to see this at all…oh well. So much for a “forum” to exchange ideas and opinions.

Have a look at this link for a story of someone getting ripped off by a wrapper:
http://www.jenman.com.au/NewsStories1.php?id=37

“Some wrappers are now teaching the secrets of their success – for a hefty fee. And so we now have the spectrum of naïve investors encouraged to enter into unethical and exploitive schemes.”
http://www.jenman.com.au/NewsArticles1.php?id=11

I’m not saying i disagree with Steve charging thousands of dollars to people who aren’t informed about investing, so please don’t come down on me about that.

I agree he has to make a living, and that running seminars is a better money spinner than vendor financing at a 3% margin… i’d be doing the same if i had the courage.

Hi there,

Verr-ee- interesting point made by those ‘anti-wrapping’ articles.

As an investor who is still sitting on the fence as to whether I want to get involved in wraps and sell houses to people that other lenders would call ‘bad credit risks’ – and notwithstanding that I could be one myself – I had not considered before reading this article that there was any risk from the purchaser’s point of view – I had thought that all the risk was the vendor’s.

Yes – indeed, the purchaser in a wrap should (in the course of doing their due diligence) ask the vendor/wrapper ‘what guarantee do I have that you are actually going to pay off the mortgage with the money I pay you, and that a situation like in this article won’t happen to me?’

I think Steve addressed this question at the masters’, but I can’t actually remember exactly what the answer was, and so I would love to hear what Steve would answer to this.

The other thing, in terms of the family getting evicted because they can’t keep up with the repayments, well …..

even if you don’t wrap but just borrow direct from the bank with a mortgage – and don’t keep up your repayments, the bank will reposess, won’t it? Mortgagee sale?
One knows that when one enters into the contract, doesn’t one? Difference is, a person who can get ‘regular’ finance is more likely to have had a record of ‘respecting money’ , i.e. a clean credit record.

Families and entities entering into vendor-finance may not have had such a happy relationship with money – spending more than they earn, buying doodads on hire-purchase, etc.

I know the odd person that has a terrible time with money, is totally addicted to hire purchase, is always borrowing from peter to pay paul, and as soon as one HP is paid off, thinks ‘oh good, now we have X amount per week to buy something else on HP’.

If those kind of people default on an HP (paying often horrendous amounts of interest, like 17 percent or even more)
then the company comes and reposesses the thing. That’s just what happens and people know that up front. people wouldn’t get any sympathy writing in sob-stories to a current affair about that kind of thing. People would just say to them ‘you shouldn’t have bought it if you couldn’t afford it’.

i think with wraps, vendors are getting a bad rap considering they are offering people a whole HOUSE on hire purchase, on a HEAPS better deal than the average hire-purchase.

If potential wrappers were properly educated, i.e. Don’t enter into a wrap if you don’t understand it, don’t think you could commit long term, or don’t understand what will happen when you default or don’t honour your part of the bargain under a hire-purchase – then the potential wrappees of the world might realise no-one is forcing a wrap upon them, and that they are welcome to continue to rent for the rest of their lives if they wish – and if they think the risk of wrapping outweighs the possible benefits.

I have heard that defaults on wraps often actually end up win-win if the house is sold after a period where there has been capital gain, with the proceeds being split between the vendor and the wrappee. (????)

This also makes me think of the philosophical mind-set that many have, which is that if someone is making money, someone else is being ripped off. I disagree with that, because I think any market is driven by what people are prepared to pay. A bit overly simplistic, i know, but I am too tired to philosophise further right now. Maybe later. But this is an interesting topic

cheers-
Mini

Well I think the whole issue is an interesting one, and I have written to the author of the 3 articles asking his opinion on a lease-option, which in my opinion is a whole lot nicer for all concerned. Wrapping to me just sounds a bit scary. 25 years is a heck of a long time.

What if I wrap a property to someone (is that the right terminology) and I die in a car accident. Where do they stand? What if they die? What if, in 10 years time, they still can’t get a loan from a bank to pay me out? What if they decide to move? What if I want to get out of the deal if my situation changes?[?][?][?][][?][][?]

In the lease model, offered by Steve in his book, it is so much more flexible. I own the home, I am the landlord. They rent the home. One day the situation changes? They either buy, or they move out. They don’t lose anything out of the deal (except perhaps their option fee), and I don’t lose anything either (except a long term tenant, who is totally motivated to pay on time). Doesn’t that sound a whole lot cleaner?

Let me know what you think of this.[]

Well, fistly I didn’t see the article.
However, I have seen many clients get ripped off by being wrapped. And I do know a lot of clients wouldn’t have their home without it.

But,I’ll tell you what I do know. I’ve seen some posting on this site where clients have had a $10000 deposit. Firstly, if a client has a deposit of that amount, they can definately recieve their own home loan (unless, currently bankrupt or purchase price is greater than $100000, however in the posting that I saw it was not. Even if the purchase price is greater than $100000 I’d still be able to assist, via different strategies) Most wrap investors ask for a deposit,not only FHOG, what for?? If the client has got a deposit, why do they need vendor finance? Especially when there are lenders like Liberty, Bluestone, Pepper etc.. who’s interest rates start at 7.7% for 90%LVR’s and lend to discharged bankrupt (1 Day out), currently in a Part 9 or 10 etc… And this is without the add on $20000 min wrap investors charge.

I send clients to a wrap investor on a weekly basis, this is only done after every possible avenue as been totally exhausted to obtain thier own home loan.

If you realy want to satisfy your assurance, morals or what ever it may be; send your potetial clients to me first, I’ll see if I can get them a home loan, and if not I’ll send them back.

Let’s see how many wrap investors are rip off’s, greedy or genuinely help the people in need(and there are plenty of them).

email: [email protected]

Generally No, because, the service being offered was motivated, to save people from being ripped off and to allow a peace of mind for the investors, so, that they are actually helping the right people.

But on the other hand, if I don’t offer a refferal payment, investor’s will keep going the way they are going and that defeats the purpose,so, yes. This might make everyone happy. Clients get placed in the best suited loan, Investors get a peace of mind, I get to save people thousands.