Vendor Terms Contract or Wrap?

Viewing 3 posts - 1 through 3 (of 3 total)

dotpiper
Member
@dotpiper
Join Date: 2010
Post Count: 1
November 21, 2013 - 2:56 am
Hi, I have a property which I still have a mortgage on and have been renting
to the same tenants for about 4 years. I want to offer them vendor terms to
buy it over say five years with a small deposit as they would not be able to get a loan as yet. They are very happy to do
this – can you tell me if this is possible – one solicitor told me I would
have to discharge the mortgage the other said yes but all the monies paid by
the tenant goes straight into my mortgage – my idea was to continue to make the same
payments and the extra would be cashflow for me.
Or can this be done as a wrap?
Look forward to your advice, thank you.
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
November 22, 2013 - 4:40 am
Yes it could be done. This is what is called a 'wrap'. Title would remain in your name until they are able to get conventional finance and pay your out.
Read your loan agreement though as you may need to get the lender's permission.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email Me
Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
jeddi
Participant
@jeddi
Join Date: 2007
Post Count: 2
November 22, 2013 - 5:20 am
Hi Dotpiper,
What you are proposing is quite reasonable and you can do just what you are suggesting. You would do well to get some one on one assistance however to ensure that you are entering into an agreement with someone who has the capacity to pay you and can get a home loan to complete the transaction at the end of the day.
You also need to set the arrangement up so that all your what-ifs are covered…such as -what if they lose their job, what if you decide you need to complete earlier, what if they change their mind, what if they cant get a loan in four years etc.
Wraps are a great solution for you, and for a buyer who cant qualify for bank finance right now, but just do your due diligence first or get some hand holding from an expert such as a vendor finance consultant with a Credit licence to make sure you aren't making any fundamental errors.
Good luck with it.