hi everyone, just a querie about leaving money in a purchase deal:
1)If i was to purchase an IP by asking the vendor to leave in 20% of the price, meaning i would only be borrowing 80% from the bank to satisfy their guidelines, then asking the vendor to allow me to “borrow” 20% from them with a fixed interest rate over say 5 years, but to be paid as a lump sum at the end of the 5 year term, then would the banks allow this & would i have to notify them of the situation?
2)Additionally, could they presume that i am effectively buying the IP at a lower price (80%) and only loan me 80% of the 80% value?
3)Also, if they would allow this, would this be an effective tool for purchasing, assuming that the property would increse in value over the 5 year period in order to cover the 20% repayment plus Interest to the vendor?
4)Would it be wise to have access to a certain cash amount incase of a shortfall in the proprty value increase & the amount to be repaid to the vendor?
any info on this situation would be hugely appreciated, thanks guys/girls [eh]
Originally posted by nathan210:hi everyone, just a querie about leaving money in a purchase deal:
1)If i was to purchase an IP by asking the vendor to leave in 20% of the price, meaning i would only be borrowing 80% from the bank to satisfy their guidelines, then asking the vendor to allow me to “borrow” 20% from them with a fixed interest rate over say 5 years, but to be paid as a lump sum at the end of the 5 year term, then would the banks allow this & would i have to notify them of the situation?
I bought my first house borrowing only the 80% and the bank was satisfied with my application. Having said that, I don’t remember what questions were asked, if any, about where the rest of the funds were comming from. Presumably I made stuff up. It was many years ago.
Rakky ;P
Hi Nathan.
This idea has been discussed on the Somersoft forum in the past (try a search), but essentially the bank is entitled to know all of their risk in lending to you. If things go wrong for you (e.g. loss of income & unable to meet repayments) there will be a clause in your mortgage entitling the bank to immediate repayment of the mortgage. This could be awkward! Also, there is no guarantee that the property will increase in value in the next five years – one reason why the banks only lend to 80%.Terence McMahon
HomeWin
FinanceYes banks will lend on this deal. They would have to know about it if the vendor was going to take out a second mortgage on the property. They would also want to factor in your repayments on the extra loan to the vendor (probably even if you had only one payment at the end).
Terryw
Discover Home Loans
North Sydney
[email protected]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
You must be logged in to reply to this topic. If you don't have an account, you can register here.
