first up…I hope I put this under the correct banner
second up, I need a little help with the whole investor buys a house, we pay the investors loan for 7 years, then we go to the bank and buy the house. We have been told the investor will make about 40 thou off us over that 7 years (excluding his tax breaks and what not) BUT the agreed value of the house is calculated on a 4% rise (well technically 8% so we pay half of that)
looking at forecasts, Im a tad worried (alot worried) that the house we buy will NOT go up by the projected 8%, due to the worlds determination to go to hell lol..we are also a tad concerned it may not hit the 4% which means we will lose money.
When its all said and done, after 7 years we will own about 16% of the house, but given the figures, we would still have to borrow a substantial amount (and my partner has to wait the 7 years to apply for first home owners grant, thats if its still an option, because we are not buying a house yet, our investor is)
Im a little confused, but mainly at the whole 8% forecast we have been given, because it states in 7 years our house will go from 300,00 to over 500,00….and I just cant see the house being worth that much. Someone, ANYONE please help!?
Kinks
Hi Kinks
You are talking about wrapping or vendor finance. There is no rule on how it is done, so it depends on the market and your negotiating skills. Usually they will add 20% to the price of the property when they sell to you and then add 2 to 3% to the market interest rate they will charge you. So if the property is valued at $100,000 and rates are 5.21%, they will sell it to you for $120,000 and you will pay it off over 30 years at 8.21%. After a few years if the value has risen, you could possibily refinance with a bank at the lower rate. If prices don't rise you will have to keep paying it off and will gradually build up equity as the loan principle decreases./
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
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