Hi All
I am working of obtaining VF by offering about 60% of the asking price and the balance (40%) spread over 10 years with no interest. I am getting a number of interested vendors and am a bit concerned about how my financing would work.
I can access the $300K cash through a my LOC and my plan is the refinance once the home is purchased, to restore my LOC and have the whole house purchased on finance.
But, if the house has a morgage on it (ie that of the vendor for the 10 years of payments) how can I get the house refinanced? Won’t the bank refuse to finance the house if there is the mortgage attached already.
The vendors I’ve communicated with via the agents won’t take a caveat 0 only a mortgage.
Have I got the order of things mixed up? Should I have the finance already approved???
Appreciate all words of wisdom and experience.
cheers
JenniferHi Jennifer
Sounds like an excellent plan.
The original owner will have a mortgage on the property, but you will be paying out this mortgage, so it should not be a problem. Just think of it like you have loans with Bank A and Bank B, if the price has increased you just refinance the lot with bank C and pay out bank A and bank B.
Terryw
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Hi Terry
Is it possible. in the first place, for me to get a loan from a bank for a property already encumbered with a mortgage (ie that of the vendor). Is this case the bank would be second in line?
Thanks
JenniferJenny
You would normally do it the other way around.
The Bank would take the first mortgage as this will be a longer term debt and the vendor would take a secured 2nd mortgage.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner.
Ph: 07 3720 1888
[email protected]Richard Taylor | Australia's leading private lender
Hi Richard
Thanks for your input to my query on Property Investing Forum. You said that normally you would get a first mortgage with a bank an dthen the second with the vendor which I understand is the norm. However, I’m wondering if it’s possible to do it the other way around.
ie I buy the property with my LOC, obtain possession of the property with the vendor’s mortgage in place, then go to the bank and refinance the entire amount of the property?
thanks
JenniferHi Jennifer
Yes that should be doable as long as the Vendor releases his first mortgage when you make application for your new Bank loan.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
Hi Jennifer,
just a bit off the topic, how do you find vendors that would lend you 40% over 10 years at no interest [blink]? I am currently working on the terms where I offer 60% upfront and the remainder in 5 years at 5 – 8% per year (depending on whether vendor wants monthly payments or not). I’ve started talking to agents and found them to be very skeptical.
I would highly appreciate your input!
Agents like to keep it simple so these strategies work in theory but takes a bit more effort to execute. One way to secure it is to pay over the offer price but in a flat to down market, you want to be sure that the “doubling in value every 7-10 year IP theory” holds true for your offered IP. I’m afraid a lot of cra* on offer would struggle to get you the cap gains. If it does get there, you’d have burnt an equivalent hole in your pocket due to the -‘ve cash flow over the 10 years just carrying the IP. Another thing to note is that m’gees are reluctant to offer up the CT for a 2nd mortgage. Perhaps you can convince the vendor to take a caveat instead. Less security than a registered mortgage but a way to get around modern day practical issues which the text books don’t really talk about. Keep at it though, I’m sure there would be desperate enough vendors out there leading into X’mas.
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